f10qsep302009.htm
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
|
|
|
Form
10-Q
|
(Mark
One)
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|
|
|
[X]
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT
OF 1934
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|
|
|
For
the quarterly period ended September 30, 2009
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|
|
OR
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[ ]
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT
OF 1934
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|
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|
For
the transition period from ----- to
-----
|
Commission
file number 0-13163
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|
|
Acxiom
Corporation
(Exact
Name of Registrant as Specified in Its Charter)
|
|
|
DELAWARE
(State
or Other Jurisdiction of
Incorporation
or Organization)
|
71-0581897
(I.R.S.
Employer
Identification
No.)
|
|
|
P.O.
Box 8180, 601 E. Third Street,
Little
Rock, Arkansas
(Address
of Principal Executive Offices)
|
72201
(Zip
Code)
|
|
|
(501)
342-1000
(Registrant's
Telephone Number, Including Area
Code)
|
Indicate
by check mark whether the 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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
|
|
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|
Yes [X]
|
No [
]
|
|
|
|
Indicate
by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such
filings).
|
|
Yes [
]
|
No [
]
|
|
|
|
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting
company. See the definition of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
|
|
|
Large
accelerated filer [X]
|
|
Accelerated
filer [ ]
|
|
|
|
Non-accelerated
filer [ ]
|
|
Smaller
reporting company [ ]
|
|
|
Indicate
by check mark whether the registrant is a shell company (as defined by
Rule 12b-2 of the Exchange Act.)
|
|
|
Yes [
]
|
No [X]
|
|
|
|
|
|
The
number of shares of Common Stock, $ 0.10 par value per share outstanding
as of November 3, 2009 was 79,058,990.
|
|
ACXIOM
CORPORATION AND SUBSIDIARIES
INDEX
REPORT
ON FORM 10-Q
September
30, 2009
|
Part
I.
|
|
Financial
Information
|
Page
No.
|
|
Item
1.
|
Financial
Statements
|
|
|
|
Condensed
Consolidated Balance Sheets
|
|
|
|
|
as
of September 30, 2009 and March 31, 2009 (Unaudited)
|
3
|
|
|
Condensed
Consolidated Statements of Operations
|
|
|
|
|
for
the Three Months ended September 30, 2009 and 2008
(Unaudited)
|
4
|
|
|
Condensed
Consolidated Statements of Operations
|
|
|
|
|
for
the Six Months ended September 30, 2009 and 2008
(Unaudited)
|
5
|
|
|
Condensed
Consolidated Statement of Stockholders’ Equity and Comprehensive
Income
|
|
|
|
|
for
the Six Months ended September 30, 2009 (Unaudited)
|
6
|
|
|
Condensed
Consolidated Statements of Cash Flows
|
|
|
|
|
for
the Six Months ended September 30, 2009 and 2008
(Unaudited)
|
7-8
|
|
|
Notes
to Condensed Consolidated Financial Statements
|
9-19
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
20-29
|
|
Item
3.
|
Quantitative
and Qualitative Disclosure about Market Risk
|
30
|
|
Item
4.
|
Controls
and Procedures
|
30
|
|
|
|
|
|
Part
II.
|
|
Other
Information
|
|
|
Item
1.
|
Legal
Proceedings
|
31
|
|
Item
4.
|
Submissions
of Matters to a Vote of Security Holders
|
31
|
|
Item
6.
|
Exhibits
|
31
|
|
|
|
|
|
Signature
|
|
|
|
32
|
|
|
|
|
|
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|
|
PART
I. FINANCIAL INFORMATION
Item
1. Financials Statements
ACXIOM
CORPORATION AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars
in thousands)
|
|
September
30,
2009
|
|
|
March
31,
2009
|
|
ASSETS
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
167,634 |
|
|
$ |
177,166 |
|
Trade
accounts receivable, net
|
|
|
182,612 |
|
|
|
184,814 |
|
Deferred
income taxes
|
|
|
45,503 |
|
|
|
45,641 |
|
Refundable
income taxes
|
|
|
- |
|
|
|
4,579 |
|
Other
current assets
|
|
|
52,002 |
|
|
|
46,873 |
|
Total
current assets
|
|
|
447,751 |
|
|
|
459,073 |
|
Property
and equipment, net of accumulated depreciation and
amortization
|
|
|
218,806 |
|
|
|
214,589 |
|
Software,
net of accumulated amortization
|
|
|
45,819 |
|
|
|
52,798 |
|
Goodwill
|
|
|
470,621 |
|
|
|
454,944 |
|
Purchased
software licenses, net of accumulated amortization
|
|
|
55,564 |
|
|
|
65,341 |
|
Deferred
costs, net
|
|
|
64,699 |
|
|
|
70,343 |
|
Data
acquisition costs, net
|
|
|
26,624 |
|
|
|
31,317 |
|
Other
assets, net
|
|
|
17,578 |
|
|
|
18,938 |
|
|
|
$ |
1,347,462 |
|
|
$ |
1,367,343 |
|
LIABILITIES AND STOCKHOLDERS’
EQUITY
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Current
installments of long-term debt
|
|
$ |
43,636 |
|
|
$ |
40,967 |
|
Trade
accounts payable
|
|
|
32,242 |
|
|
|
27,701 |
|
Accrued
expenses:
|
|
|
|
|
|
|
|
|
Payroll
|
|
|
24,379 |
|
|
|
44,823 |
|
Other
|
|
|
85,713 |
|
|
|
86,072 |
|
Deferred
revenue
|
|
|
50,118 |
|
|
|
54,991 |
|
Income
taxes
|
|
|
171 |
|
|
|
- |
|
Total
current liabilities
|
|
|
236,259 |
|
|
|
254,554 |
|
Long-term
debt
|
|
|
490,608 |
|
|
|
537,272 |
|
Deferred
income taxes
|
|
|
65,586 |
|
|
|
58,526 |
|
Other
liabilities
|
|
|
9,156 |
|
|
|
9,321 |
|
Commitments
and contingencies
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
Common
stock
|
|
|
11,620 |
|
|
|
11,576 |
|
Additional
paid-in capital
|
|
|
807,251 |
|
|
|
800,094 |
|
Retained
earnings
|
|
|
455,589 |
|
|
|
441,950 |
|
Accumulated
other comprehensive income (loss)
|
|
|
9,994 |
|
|
|
(6,238 |
) |
Treasury
stock, at cost
|
|
|
(738,601 |
) |
|
|
(739,712 |
) |
Total
stockholders' equity
|
|
|
545,853 |
|
|
|
507,670 |
|
|
|
$ |
1,347,462 |
|
|
$ |
1,367,343 |
|
See
accompanying notes to condensed consolidated financial
statements.
|
|
|
|
|
|
|
|
|
ACXIOM
CORPORATION AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars
in thousands, except per share amounts)
|
|
For
the Three Months ended
September
30
|
|
|
|
2009
|
|
|
2008
|
|
Revenue:
|
|
|
|
|
|
|
Services
|
|
$ |
210,213 |
|
|
$ |
233,605 |
|
Products
|
|
|
60,892 |
|
|
|
95,330 |
|
Total
revenue
|
|
|
271,105 |
|
|
|
328,935 |
|
Operating
costs and expenses:
|
|
|
|
|
|
|
|
|
Cost
of revenue
|
|
|
|
|
|
|
|
|
Services
|
|
|
165,792 |
|
|
|
180,986 |
|
Products
|
|
|
46,129 |
|
|
|
77,038 |
|
Total
cost of revenue
|
|
|
211,921 |
|
|
|
258,024 |
|
Selling,
general and administrative
|
|
|
37,964 |
|
|
|
38,988 |
|
Gains,
losses and other items, net
|
|
|
(27 |
) |
|
|
(2,370 |
) |
Total
operating costs and expenses
|
|
|
249,858 |
|
|
|
294,642 |
|
Income
from operations
|
|
|
21,247 |
|
|
|
34,293 |
|
Other
income (expense):
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(5,423 |
) |
|
|
(8,591 |
) |
Other,
net
|
|
|
223 |
|
|
|
287 |
|
Total
other income (expense)
|
|
|
(5,200 |
) |
|
|
(8,304 |
) |
Earnings
before income taxes
|
|
|
16,047 |
|
|
|
25,989 |
|
Income
taxes
|
|
|
6,602 |
|
|
|
10,136 |
|
Net
earnings
|
|
$ |
9,445 |
|
|
$ |
15,853 |
|
|
|
|
|
|
|
|
|
|
Earnings
per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
0.12 |
|
|
$ |
0.20 |
|
Diluted
|
|
$ |
0.12 |
|
|
$ |
0.20 |
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to condensed consolidated financial
statements.
|
|
|
|
|
|
|
|
|
ACXIOM
CORPORATION AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars
in thousands, except per share amounts)
|
|
For
the Six Months ended
September
30
|
|
|
|
2009
|
|
|
2008
|
|
Revenue:
|
|
|
|
|
|
|
Services
|
|
$ |
409,539 |
|
|
$ |
470,300 |
|
Products
|
|
|
117,547 |
|
|
|
189,708 |
|
Total
revenue
|
|
|
527,086 |
|
|
|
660,008 |
|
Operating
costs and expenses:
|
|
|
|
|
|
|
|
|
Cost
of revenue
|
|
|
|
|
|
|
|
|
Services
|
|
|
325,368 |
|
|
|
359,847 |
|
Products
|
|
|
92,048 |
|
|
|
154,755 |
|
Total
cost of revenue
|
|
|
417,416 |
|
|
|
514,602 |
|
Selling,
general and administrative
|
|
|
75,607 |
|
|
|
88,470 |
|
Gains,
losses and other items, net
|
|
|
320 |
|
|
|
(2,915 |
) |
Total
operating costs and expenses
|
|
|
493,343 |
|
|
|
600,157 |
|
Income
from operations
|
|
|
33,743 |
|
|
|
59,851 |
|
Other
income (expense):
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(10,928 |
) |
|
|
(18,050 |
) |
Other,
net
|
|
|
105 |
|
|
|
1,646 |
|
Total
other income (expense)
|
|
|
(10,823 |
) |
|
|
(16,404 |
) |
Earnings
before income taxes
|
|
|
22,920 |
|
|
|
43,447 |
|
Income
taxes
|
|
|
9,281 |
|
|
|
16,944 |
|
Net
earnings
|
|
$ |
13,639 |
|
|
$ |
26,503 |
|
|
|
|
|
|
|
|
|
|
Earnings
per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
0.17 |
|
|
$ |
0.34 |
|
Diluted
|
|
$ |
0.17 |
|
|
$ |
0.34 |
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to condensed consolidated financial
statements.
|
|
|
|
|
|
|
|
|
ACXIOM
CORPORATION AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE
INCOME
SIX
MONTHS ENDED SEPTEMBER 30, 2009
(Unaudited)
(Dollars
in thousands)
|
|
Common
Stock
|
|
Additional
|
|
|
|
|
|
Accumulated
other
|
|
Treasury
stock
|
|
Total
|
|
|
Number
of
shares
|
|
Amount
|
|
paid-in
capital
|
|
Comprehensive
income (loss)
|
|
Retained
earnings
|
|
comprehensive
income (loss)
|
|
Number
of
shares
|
|
Amount
|
|
stockholders’
equity
|
Balances
at March 31, 2009
|
|
115,756,876
|
|
$11,576
|
|
$800,094
|
|
|
|
$441,950
|
|
$(6,238)
|
|
(37,224,867)
|
|
$(739,712)
|
|
$507,670
|
Employee
stock awards, benefit plans and other issuances
|
|
314,829
|
|
31
|
|
2,631
|
|
$ -
|
|
-
|
|
-
|
|
-
|
|
-
|
|
2,662
|
Restricted
stock units vested
|
|
130,508
|
|
13
|
|
(13)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
Non-cash
share-based compensation
|
|
-
|
|
-
|
|
4,539
|
|
-
|
|
-
|
|
-
|
|
70,631
|
|
1,111
|
|
5,650
|
Comprehensive
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation
|
|
-
|
|
-
|
|
-
|
|
15,932
|
|
-
|
|
15,932
|
|
-
|
|
-
|
|
15,932
|
Unrealized
gain on interest rate swap, net of tax
|
|
-
|
|
-
|
|
-
|
|
327
|
|
-
|
|
327
|
|
-
|
|
-
|
|
327
|
Unrealized
loss on marketable securities, net of tax
|
|
-
|
|
-
|
|
-
|
|
(27)
|
|
-
|
|
(27)
|
|
-
|
|
-
|
|
(27)
|
Net
earnings
|
|
-
|
|
-
|
|
-
|
|
13,639
|
|
13,639
|
|
-
|
|
-
|
|
-
|
|
13,639
|
Total
comprehensive income
|
|
|
|
|
|
|
|
$29,871
|
|
|
|
|
|
|
|
|
|
|
Balances
at September 30, 2009
|
|
116,202,213
|
|
$11,620
|
|
$807,251
|
|
|
|
$455,589
|
|
$9,994
|
|
(37,154,236)
|
|
$(738,601)
|
|
$545,853
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to condensed consolidated financial
statements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ACXIOM
CORPORATION AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars
in thousands)
|
|
For
the Six Months ended
September
30
|
|
|
|
2009
|
|
|
2008
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
Net
earnings
|
|
$ |
13,639 |
|
|
$ |
26,503 |
|
Adjustments
to reconcile net earnings to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
81,742 |
|
|
|
104,620 |
|
Loss/(gain)
on disposal of assets, net
|
|
|
7 |
|
|
|
(3,242 |
) |
Deferred
income taxes
|
|
|
8,719 |
|
|
|
7,853 |
|
Non-cash
share-based compensation expense
|
|
|
5,650 |
|
|
|
6,232 |
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable, net
|
|
|
(1,809 |
) |
|
|
(11,335 |
) |
Deferred
costs
|
|
|
(3,344 |
) |
|
|
(2,068 |
) |
Other
assets
|
|
|
3,461 |
|
|
|
20,815 |
|
Accounts
payable and other liabilities
|
|
|
(25,105 |
) |
|
|
(27,328 |
) |
Deferred
revenue
|
|
|
(6,091 |
) |
|
|
(6,774 |
) |
Net
cash provided by operating activities
|
|
|
76,869 |
|
|
|
115,276 |
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Payments
received from investments
|
|
|
- |
|
|
|
2,596 |
|
Sale
of assets
|
|
|
- |
|
|
|
24,174 |
|
Capitalized
software development costs
|
|
|
(4,815 |
) |
|
|
(9,129 |
) |
Capital
expenditures
|
|
|
(21,893 |
) |
|
|
(12,951 |
) |
Cash
collected from the sale and license of software
|
|
|
- |
|
|
|
2,000 |
|
Data
acquisition costs
|
|
|
(8,781 |
) |
|
|
(15,129 |
) |
Net
cash paid in acquisitions
|
|
|
357 |
|
|
|
(12,703 |
) |
Net
cash used in investing activities
|
|
|
(35,132 |
) |
|
|
(21,142 |
) |
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Payments
of debt
|
|
|
(55,125 |
) |
|
|
(59,501 |
) |
Dividends
paid
|
|
|
- |
|
|
|
(9,312 |
) |
Sale
of common stock
|
|
|
2,662 |
|
|
|
5,915 |
|
Income
tax benefit of stock options, warrants and restricted
stock
|
|
|
- |
|
|
|
115 |
|
Acquisition
of treasury stock
|
|
|
(307 |
) |
|
|
- |
|
Net
cash used in financing activities
|
|
|
(52,770 |
) |
|
|
(62,783 |
) |
Effect
of exchange rate changes on cash
|
|
|
1,501 |
|
|
|
(642 |
) |
Net
increase (decrease) in cash and cash equivalents
|
|
|
(9,532 |
) |
|
|
30,709 |
|
Cash
and cash equivalents at beginning of period
|
|
|
177,166 |
|
|
|
62,661 |
|
Cash
and cash equivalents at end of period
|
|
$ |
167,634 |
|
|
$ |
93,370 |
|
|
|
|
|
|
|
|
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
(Dollars
in thousands)
|
|
For
the Six Months ended
September
30
|
|
|
|
2009
|
|
|
2008
|
|
Supplemental
cash flow information:
|
|
|
|
|
|
|
Cash
paid (received) during the period for:
|
|
|
|
|
|
|
Interest
|
|
$ |
10,586 |
|
|
$ |
16,421 |
|
Income
taxes
|
|
|
(4,260 |
) |
|
|
(5,887 |
) |
Payments
on capital leases and installment payment arrangements
|
|
|
15,297 |
|
|
|
24,083 |
|
Payments
on software and data license liabilities
|
|
|
5,718 |
|
|
|
16,788 |
|
Prepayments
of debt
|
|
|
30,000 |
|
|
|
14,500 |
|
Other
debt payments, excluding line of credit
|
|
|
4,110 |
|
|
|
4,130 |
|
Non-cash
investing and financing activities:
|
|
|
|
|
|
|
|
|
Acquisition
of property and equipment under capital leases and installment payment
arrangements
|
|
|
10,387 |
|
|
|
5,659 |
|
Enterprise
software licenses acquired under software obligations
|
|
|
611 |
|
|
|
1,546 |
|
See
accompanying notes to condensed consolidated financial
statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ACXIOM
CORPORATION AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS
OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
These
condensed consolidated financial statements have been prepared by Acxiom
Corporation (“Registrant”, “Acxiom” or “the Company”), without audit, pursuant
to the rules and regulations of the Securities and Exchange Commission (“SEC” or
“the Commission”). In the opinion of the Registrant’s management all
adjustments necessary for a fair presentation of the results for the periods
included have been made and the disclosures are adequate to make the information
presented not misleading. All such adjustments are of a normal
recurring nature. Certain note information has been omitted because
it has not changed significantly from that reflected in notes 1 through 19 of
the Notes to Consolidated Financial Statements filed as part of Item 8 of the
Registrant’s annual report on Form 10-K for the fiscal year ended March 31, 2009
(“2009 Annual Report”), as filed with the Commission on May 29,
2009. This report and the accompanying condensed consolidated
financial statements should be read in connection with the 2009 Annual
Report. The financial information contained in this report is not
necessarily indicative of the results to be expected for any other period or for
the full fiscal year ending March 31, 2010.
Management
of the Company has made a number of estimates and assumptions relating to the
reporting of assets and liabilities and the disclosure of contingent assets and
liabilities to prepare these condensed consolidated financial statements in
conformity with accounting principles generally accepted in the United
States. Actual results could differ from those
estimates. Certain of the accounting policies used in the preparation
of these condensed consolidated financial statements are complex and require
management to make judgments and/or significant estimates regarding amounts
reported or disclosed in these financial statements. Additionally,
the application of certain of these accounting policies is governed by complex
accounting principles and their interpretation. A discussion of the
Company’s significant accounting principles and their application is included in
note 1 and in Item 7, Management’s Discussion and Analysis of Financial
Condition and Results of Operations, to the Company’s 2009 Annual
Report.
In
May 2009, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 165, “Subsequent Events” (“SFAS
No. 165”). SFAS No. 165 was subsequently codified in the FASB
Accounting Standards Codification Topic 855 (“ASC 855”). ASC 855
establishes principles and standards related to the accounting for and
disclosure of events that occur after the balance sheet date but before
financial statements are issued. ASC 855 requires an entity to
recognize, in the financial statements, subsequent events that provide
additional information regarding conditions that existed at the balance sheet
date. In accordance with this standard, which was effective beginning
with the quarter ended June 30, 2009, management has evaluated subsequent events
for accounting and disclosure through the date of filing this quarterly report
on Form 10-Q, which is November 6, 2009.
2. EARNINGS
PER SHARE AND STOCKHOLDERS’ EQUITY:
Earnings Per
Share
A
reconciliation of the numerator and denominator of basic and diluted earnings
per share is shown below (in thousands, except per share amounts):
|
|
For
the quarter ended
September
30
|
|
|
For
the six months ended
September
30
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
Basic
earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator
– net earnings
|
|
$ |
9,445 |
|
|
$ |
15,853 |
|
|
$ |
13,639 |
|
|
$ |
26,503 |
|
Denominator
– weighted-average shares outstanding
|
|
|
78,915 |
|
|
|
77,716 |
|
|
|
78,791 |
|
|
|
77,559 |
|
Basic
earnings per share
|
|
$ |
0.12 |
|
|
$ |
0.20 |
|
|
$ |
0.17 |
|
|
$ |
0.34 |
|
Diluted
earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator
– net earnings
|
|
$ |
9,445 |
|
|
$ |
15,853 |
|
|
$ |
13,639 |
|
|
$ |
26,503 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
shares outstanding
|
|
|
78,915 |
|
|
|
77,716 |
|
|
|
78,791 |
|
|
|
77,559 |
|
Dilutive
effect of common stock options, warrants,
and
restricted stock as computed under the
treasury
stock method
|
|
|
464 |
|
|
|
447 |
|
|
|
404 |
|
|
|
400 |
|
|
|
|
79,379 |
|
|
|
78,163 |
|
|
|
79,195 |
|
|
|
77,959 |
|
Diluted
earnings per share
|
|
$ |
0.12 |
|
|
$ |
0.20 |
|
|
$ |
0.17 |
|
|
$ |
0.34 |
|
As of
September 30, 2009, the Company had options and warrants outstanding providing
for the purchase of approximately 12.1 million shares of common
stock. As of September 30, 2008, the Company had options and warrants
outstanding providing for the purchase of approximately 12.5 million shares of
common stock. Options, warrants and restricted stock units that were
outstanding during the periods presented, but were not included in the
computation of diluted earnings per share because the effect was antidilutive
are shown below (in thousands, except per share amounts):
|
|
For
the quarter ended
September
30
|
|
|
For
the six months ended
September
30
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
Number
of shares outstanding under options, warrants and restricted stock
units
|
|
|
12,386 |
|
|
|
11,180 |
|
|
|
11,705 |
|
|
|
11,062 |
|
Range
of exercise prices for options and warrants
|
|
$ |
9.51-$268.55 |
|
|
$ |
13.14-$268.55 |
|
|
$ |
10.22-268.55 |
|
|
$ |
12.92-$268.55 |
|
Stockholders’
Equity
The
Company did not declare a dividend on its common stock in the six months ended
September 30, 2009 and declared a dividend on its common stock of $0.12 per
share in the six months ended September 30, 2008.
There
were no shares repurchased under the Company’s common stock repurchase program
in either the six months ended September 30, 2009 or 2008. At
September 30, 2009, the maximum dollar value of shares that may yet be purchased
under the program is $47.9 million. In the six months ending
September 30, 2009, the Company issued 70,631 shares of treasury stock to
members of the board who elected to receive their annual compensation in Company
stock.
3. SHARE-BASED
COMPENSATION:
Share-based Compensation
Plans
Stock
Option Activity
The
Company has stock option and equity compensation plans for which a total of 37.7
million shares of the Company’s common stock have been reserved for issuance
since inception of the plans. These plans provide that the option
prices of qualified options will be at or above the fair market value of the
common stock at the time of the grant. Board policy has required that
nonqualified options be priced at or above the fair market value of the common
stock at the time of grant. At September 30, 2009, there were a total
of 4.5 million shares available for future grants under the plans.
The
Company granted 532,000 stock options in the six months ended September 30,
2009. The per-share weighted-average fair value of the stock options
granted during the six months ended September 30, 2009 was
$4.61. This valuation was determined using a customized binomial
lattice approach with the following weighted-average assumptions: dividend yield
of 0.0%; risk-free interest rate of 3.5%; expected option life of 5.4 years and
expected volatility of 53.9%. The Company granted 679,126 stock
options in the six months ended September 30, 2008. The per-share
weighted-average fair value of the stock options granted during the six months
ended September 30, 2008 was $4.41. This valuation was determined
using a customized binomial lattice approach with the following weighted-average
assumptions: dividend yield of 1.7%; risk-free interest rate of 3.9%; expected
option life of 5.6 years and expected volatility of 36.4%.
Option
activity for the six months ended September 30, 2009 was as
follows:
|
|
Number
of
shares
|
|
|
Weighted-average
exercise price
per
share
|
|
|
Weighted-average
remaining contractual term (in years)
|
|
|
Aggregate
intrinsic value
(in
thousands)
|
|
Outstanding
at March 31, 2009
|
|
|
10,414,093 |
|
|
$ |
20.83 |
|
|
|
|
|
|
|
Granted
|
|
|
532,000 |
|
|
$ |
8.91 |
|
|
|
|
|
|
|
Exercised
|
|
|
(9,103 |
) |
|
$ |
7.45 |
|
|
|
|
|
$ |
18 |
|
Forfeited
or cancelled
|
|
|
(267,905 |
) |
|
$ |
19.65 |
|
|
|
|
|
|
|
|
Outstanding
at September 30, 2009
|
|
|
10,669,085 |
|
|
$ |
20.28 |
|
|
|
6.57 |
|
|
$ |
508 |
|
Exercisable
at September 30, 2009
|
|
|
8,824,692 |
|
|
$ |
21.75 |
|
|
|
6.11 |
|
|
$ |
203 |
|
The
aggregate intrinsic value in the table above represents the total pre-tax
intrinsic value (the difference between Acxiom’s closing stock price on the last
trading day of its second quarter of fiscal 2010 and the exercise price for each
in-the-money option) that would have been received by the option holders had
vested option holders exercised their options on September 30,
2009. This amount changes based upon changes in the fair market value
of Acxiom’s stock.
Following
is a summary of stock options outstanding and exercisable as of September 30,
2009:
|
|
|
Options
outstanding
|
|
|
Options
exercisable
|
|
Range
of
exercise
price
per
share
|
|
|
Options
outstanding
|
|
Weighted-
average remaining contractual life
|
|
Weighted-average
exercise
price
per
share
|
|
|
Options
exercisable
|
|
|
Weighted-average
exercise
price
per
share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
3.69
- $ 9.62 |
|
|
|
658,399 |
|
9.04
years
|
|
$ |
8.69 |
|
|
|
86,399 |
|
|
$ |
7.13 |
|
$ |
10.22
- $ 15.00 |
|
|
|
2,424,349 |
|
7.54
years
|
|
$ |
12.41 |
|
|
|
1,615,706 |
|
|
$ |
12.31 |
|
$ |
15.10
- $ 19.82 |
|
|
|
2,482,571 |
|
6.35
years
|
|
$ |
16.48 |
|
|
|
2,193,821 |
|
|
$ |
16.59 |
|
$ |
20.12
- $ 25.00 |
|
|
|
2,590,415 |
|
6.84
years
|
|
$ |
22.97 |
|
|
|
2,490,415 |
|
|
$ |
22.89 |
|
$ |
25.44
- $ 29.30 |
|
|
|
1,417,597 |
|
5.22
years
|
|
$ |
26.81 |
|
|
|
1,342,597 |
|
|
$ |
26.76 |
|
$ |
30.93
- $ 39.12 |
|
|
|
809,827 |
|
4.49
years
|
|
$ |
35.70 |
|
|
|
809,827 |
|
|
$ |
35.70 |
|
$ |
40.50
- $ 75.55 |
|
|
|
283,197 |
|
4.82
years
|
|
$ |
44.51 |
|
|
|
283,197 |
|
|
$ |
44.51 |
|
$ |
168.61
- $268.55 |
|
|
|
2,730 |
|
0.39
years
|
|
$ |
213.46 |
|
|
|
2,730 |
|
|
$ |
213.46 |
|
|
|
|
|
|
10,669,085 |
|
6.57
years
|
|
$ |
20.28 |
|
|
|
8,824,692 |
|
|
$ |
21.75 |
|
3. SHARE-BASED
COMPENSATION (continued):
Total
expense related to stock options for the six months ended September 30, 2009 and
2008 was approximately $1.1 million and $1.4 million
respectively. Future expense for these options is expected to be
approximately $6.5 million over the next four years.
Restricted
Stock Unit Activity
Non-vested
restricted stock unit activity for the period ending September 30, 2009 was as
follows:
|
|
Number
of
shares
|
|
|
Weighted
average fair value per
share
at grant date
(in
thousands)
|
|
|
Weighted-average
remaining contractual term (in years)
|
|
Outstanding
at March 31, 2009
|
|
|
1,499,470 |
|
|
$ |
13.83 |
|
|
|
2.49 |
|
Granted
|
|
|
1,529,000 |
|
|
$ |
9.54 |
|
|
|
|
|
Vested
|
|
|
(130,508 |
) |
|
$ |
24.09 |
|
|
|
|
|
Forfeited
or cancelled
|
|
|
(152,952 |
) |
|
$ |
12.90 |
|
|
|
|
|
Outstanding
at September 30, 2009
|
|
|
2,745,010 |
|
|
$ |
11.24 |
|
|
|
2.66 |
|
During
the six months ended September 30, 2009, the Company granted restricted stock
units covering 1,529,000 shares of common stock with a value at the date of
grant of $14.2 million. The value at the date of grant is determined
by reference to quoted market prices for the shares. Of the
restricted stock units granted in the current period, 930,000 vest in equal
annual increments over four years. The remaining 599,000 vest subject
to 1) the Company’s achievement of certain performance criteria and 2) the
individual remaining employed by the Company for three years. If both
criteria are met the units vest three years from the date of
grant. The expense related to restricted stock in the six months
ended September 30, 2009 was $3.8 million. During the six months
ended September 30, 2008, the Company granted restricted stock units covering
831,532 shares of common stock with a value at the date of grant of $10.9
million. Of the restricted stock units granted in that period,
255,963 vest in equal annual increments over four years and the remaining
575,569 vest at the end of three years and were subject to performance criteria
that was met as of March 31, 2009. Future expense for restricted
stock units is expected to be approximately $18.2 million over the next four
years.
4. ACQUISITIONS:
In July
2008, the Company acquired the database marketing unit of ChoicePoint Precision
Marketing, LLC (“Precision Marketing”). The Company paid $9.0
million, of which $4.5 million was paid into two escrow accounts which were
subject to escrow arrangements which were finally resolved during the quarter
ended September 30, 2009. A total of $0.5 million of one of the
escrow funds has been released to reimburse the Company for costs
incurred. Of the remaining $4.0 million escrow fund, $3.6 million has
been paid to the sellers and approximately $0.4 million has been returned to the
Company. The $4.0 million placed into escrow was originally treated
as purchase price, therefore the $0.4 million returned to the Company has been
recorded as a reduction of purchase price and the $3.6 million has been charged
to goodwill. The acquired business had annual revenue of
approximately $16.0 million. The Company has omitted pro forma
disclosures related to this acquisition as the pro forma effect of this
acquisition is not material to the Company’s consolidated results for any period
presented. Precision Marketing’s results of operations are included
in the Company’s consolidated results beginning July 1, 2008.
5. OTHER
CURRENT AND NONCURRENT ASSETS:
Other
current assets consist of the following (dollars in thousands):
|
|
September
30,
2009
|
|
|
March
31,
2009
|
|
Current
portion of unbilled and notes receivable
|
|
$ |
1,105 |
|
|
$ |
1,730 |
|
Prepaid
expenses
|
|
|
38,625 |
|
|
|
31,313 |
|
Assets
of non-qualified retirement plan
|
|
|
11,284 |
|
|
|
8,155 |
|
Escrowed
cash
|
|
|
- |
|
|
|
4,344 |
|
Other
miscellaneous assets
|
|
|
988 |
|
|
|
1,331 |
|
Other
current assets
|
|
$ |
52,002 |
|
|
$ |
46,873 |
|
5. OTHER
CURRENT AND NONCURRENT ASSETS (continued):
Other
noncurrent assets consist of the following (dollars in thousands):
|
|
September
30,
2009
|
|
|
March
31,
2009
|
|
Acquired
intangible assets, net
|
|
$ |
9,731 |
|
|
$ |
11,579 |
|
Noncurrent
portion of unbilled and notes receivable
|
|
|
4,110 |
|
|
|
3,367 |
|
Other
miscellaneous noncurrent assets
|
|
|
3,737 |
|
|
|
3,992 |
|
Other
assets
|
|
$ |
17,578 |
|
|
$ |
18,938 |
|
The
acquired intangible assets noted above include customer relationship intangibles
acquired through purchase acquisitions, net of accumulated
amortization.
6. GOODWILL:
Goodwill
represents the excess of acquisition costs over the fair values of net assets
acquired in business combinations. Goodwill is reviewed at least
annually for impairment under a two-part test. Impairment exists to
the extent that the reporting unit’s recorded goodwill exceeds the residual fair
value assigned to goodwill. Any impairment that results from the
completion of the two-part test is recorded as a charge to operations during the
period in which the impairment test is completed. Completion of the
Company’s most recent annual impairment test during the quarter ended June 30,
2009 indicated that no potential impairment of its goodwill balances existed as
of April 1, 2009.
The
carrying amount of goodwill, by business segment, for the six months ended
September 30, 2009 is presented in the following table.
(dollars
in thousands)
|
|
Services
|
|
|
Products
|
|
|
Total
|
|
Balance
at March 31, 2009
|
|
$ |
336,406 |
|
|
$ |
118,538 |
|
|
$ |
454,944 |
|
Purchase
adjustments
|
|
|
5,064 |
|
|
|
- |
|
|
|
5,064 |
|
Change
in foreign currency translation adjustment
|
|
|
3,183 |
|
|
|
7,430 |
|
|
|
10,613 |
|
Balance
at September 30, 2009
|
|
$ |
344,653 |
|
|
$ |
125,968 |
|
|
$ |
470,621 |
|
7. LONG-TERM
DEBT:
Long-term
debt consists of the following (dollars in thousands):
|
|
September
30,
2009
|
|
|
March
31,
2009
|
|
Term
loan credit agreement
|
|
$ |
457,500 |
|
|
$ |
490,500 |
|
Capital
leases and installment payment obligations on land, buildings and
equipment payable in monthly payments of principal plus interest at rates
ranging from approximately 3% to 8%; remaining terms up to twelve
years
|
|
|
41,862 |
|
|
|
46,646 |
|
Warrants
|
|
|
1,499 |
|
|
|
1,492 |
|
Software
license liabilities payable over terms up to three years; effective
interest rates ranging from approximately 4% to 7%
|
|
|
10,249 |
|
|
|
12,423 |
|
Data
license agreement
|
|
|
- |
|
|
|
2,934 |
|
Other
debt and long-term liabilities
|
|
|
23,134 |
|
|
|
24,244 |
|
Total
long-term debt and capital leases
|
|
|
534,244 |
|
|
|
578,239 |
|
Less
current installments
|
|
|
43,636 |
|
|
|
40,967 |
|
Long-term
debt, excluding current installments
|
|
$ |
490,608 |
|
|
$ |
537,272 |
|
7. LONG-TERM
DEBT (continued):
Effective
September 15, 2006, the Company entered into an amended and restated credit
agreement allowing (1) term loans up to an aggregate principal amount of $600
million and (2) revolving credit facility borrowings consisting of revolving
loans, letter of credit participations and swing-line loans up to an aggregate
amount of $200 million. The term loan is payable in quarterly
principal installments of $1.5 million through September 2011, followed by
quarterly principal installments of $111.4 million through September
2012. The term loan also allows prepayments before
maturity. Revolving loan commitments and all borrowings of revolving
loans mature on September 15, 2011. The credit agreement is secured
by the accounts receivable of Acxiom and its domestic subsidiaries, as well as
by the outstanding stock of certain Acxiom subsidiaries.
Revolving
credit facility borrowings under the facility currently bear interest at LIBOR
plus 1.5% or at an alternative base rate or at the federal funds rate plus
2.25%, depending on the type of borrowing. Term loan borrowings
currently bear interest at LIBOR plus 1.75%. There were no revolving
loan borrowings outstanding at September 30, 2009 or March 31,
2009. The interest rate on term loan borrowings outstanding at
September 30, 2009 was 2.9%. Outstanding letters of credit at
September 30, 2009 were $12.5 million.
Under the
terms of certain of the above borrowings, the Company is required to maintain
certain debt-to-cash flow and debt service coverage ratios, among other
restrictions. At September 30, 2009, the Company was in compliance
with these covenants and restrictions. In addition, if certain
financial ratios and other conditions are not satisfied, the revolving credit
facility limits the Company’s ability to pay dividends in excess of $30 million
in any fiscal year (plus additional amounts in certain
circumstances).
In fiscal
2009, the Company entered into an interest rate swap agreement. The
agreement provides for the Company to pay interest through July 25, 2011 at a
fixed rate of 3.25% which when combined with a 1.75% credit spread equals a
total rate of 5.00% on $95.0 million notional amount while receiving interest
for the same period at the LIBOR rate on the same notional
amount. The LIBOR rate as of September 30, 2009 was
0.5%. The swap was entered into as a cash flow hedge against LIBOR
interest rate movements on the term loan. The Company assesses the
effectiveness of the hedge based on the hypothetical derivative
method. There was no ineffectiveness for the period ended September
30, 2009. Under the hypothetical derivative method, the cumulative
change in fair value of the actual swap is compared to the cumulative change in
fair value of the hypothetical swap, which has terms that identically match the
critical terms of the hedged transaction. Thus, the hypothetical swap
is presumed to perfectly offset the hedged cash flows. The change in
the fair value of the hypothetical swap will then be regarded as a proxy for the
present value of the cumulative change in the expected future cash flows from
the hedged transactions. All of the fair values are derived from an
interest-rate futures model. As of September 30, 2009, the hedge
relationship qualified as an effective hedge under applicable accounting
standards. Consequently, all changes in fair value of the derivative
are deferred and recorded in other comprehensive income until the related
forecasted transaction is recognized in the consolidated statement of
operations. The fair market value of the derivative was zero at
inception and an unrealized loss of $3.6 million since inception is recorded in
other comprehensive income (loss) with the offset recorded to other noncurrent
liabilities. The fair value of the interest rate swap agreement
recorded in accumulated other comprehensive income (loss) may be recognized in
the statement of operations if certain terms of the floating-rate debt change,
if the floating-rate debt is extinguished or if the interest rate swap agreement
is terminated prior to maturity. The Company has assessed the
creditworthiness of the counterparty of the swap and concludes that no
substantial risk of default exists as of September 30, 2009.
8. ALLOWANCE
FOR DOUBTFUL ACCOUNTS:
Trade
accounts receivable are presented net of allowances for doubtful accounts,
returns and credits of $9.1 million at September 30, 2009 and $10.0 million at
March 31, 2009.
9. SEGMENT
INFORMATION:
The
Company reports segment information consistent with the way management
internally disaggregates its operations to assess performance and to allocate
resources. The Company’s business segments consist of Information
Services and Information Products. The Information Services segment
includes the Company’s global lines of business for Customer Data Integration
(CDI), Multi-channel Marketing Services, Infrastructure Management Services and
Consulting Services. The Information Products segment is comprised of
the Company’s global Consumer Insights and Risk Mitigation Products lines of
business and the U.S. Background Screening Products line of
business. The Company evaluates performance of the segments based on
segment operating income, which excludes certain gains, losses and other
items. Beginning in the quarter ended September 30, 2009, the Company
has revised its calculation of segment operating income to allocate all
corporate expenses, excluding those reported as gains, losses, and other items,
to the segments. Segment results for prior periods have been
reclassified to reflect the revised segment operating income. Such
reclassifications had no effect on consolidated results.
The
gains, losses and other items are reported as other, since the Company does not
hold the individual segments responsible for these charges. The
following tables present information by business segment (dollars in
thousands):
|
|
For
the quarter ended
September
30
|
|
|
For
the six months ended
September
30
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
Information
services
|
|
$ |
210,213 |
|
|
$ |
233,605 |
|
|
$ |
409,539 |
|
|
$ |
470,300 |
|
Information
products
|
|
|
60,892 |
|
|
|
95,330 |
|
|
|
117,547 |
|
|
|
189,708 |
|
Total
revenue
|
|
$ |
271,105 |
|
|
$ |
328,935 |
|
|
$ |
527,086 |
|
|
$ |
660,008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Information
services
|
|
$ |
19,971 |
|
|
$ |
28,527 |
|
|
$ |
35,809 |
|
|
$ |
54,166 |
|
Information
products
|
|
|
1,249 |
|
|
|
3,396 |
|
|
|
(1,746 |
) |
|
|
2,770 |
|
Other
|
|
|
27 |
|
|
|
2,370 |
|
|
|
(320 |
) |
|
|
2,915 |
|
Income
from operations
|
|
$ |
21,247 |
|
|
$ |
34,293 |
|
|
$ |
33,743 |
|
|
$ |
59,851 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10. RESTRUCTURING,
IMPAIRMENT AND OTHER CHARGES:
The
Company records costs associated with employee terminations and other exit
activity in accordance with applicable accounting standards when those costs
become probable and are reasonably estimable. The following table
summarizes the restructuring activity for the six months ended September 30,
2009 (dollars in thousands):
|
|
Associate-related
reserves
|
|
|
Ongoing
contract
costs
|
|
|
Total
|
|
Balance
at March 31, 2009
|
|
$ |
8,233 |
|
|
$ |
23,932 |
|
|
$ |
32,165 |
|
Payments
|
|
|
(4,204 |
) |
|
|
(2,465 |
) |
|
|
(6,669 |
) |
Adjustments
|
|
|
977 |
|
|
|
405 |
|
|
|
1,382 |
|
Balance
at September 30, 2009
|
|
$ |
5,006 |
|
|
$ |
21,872 |
|
|
$ |
26,878 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring
Plans
In fiscal
2009, the Company recorded a total of $42.3 million in restructuring charges and
adjustments included in gains, losses and other items in the consolidated
statement of operations. The expense includes severance and other
associate-related payments of $12.4 million, lease accruals of $3.2 million,
asset disposal and write-offs of $26.5 million and adjustments to the fiscal
2008 restructuring plan of $0.2 million. Included in the asset
disposal was a $24.6 million loss incurred as a result of the Company
terminating a software contract.
10. RESTRUCTURING,
IMPAIRMENT AND OTHER CHARGES (continued):
The
associate-related payments of $12.4 million relate to the termination of
associates in the United States and Europe. Of the amount accrued,
$3.7 million remained accrued as of September 30, 2009. These costs
are expected to be paid out in fiscal 2010.
The lease
accruals of $3.2 million were evaluated under the accounting standard which
governs exit costs. The accounting standard requires the Company to
make an accrual for the liability for lease costs that will continue to be
incurred without economic benefit to the Company upon the date that the Company
ceases using the leased property. The remaining amount accrued at
September 30, 2009 is $2.4 million.
In fiscal
2008, the Company recorded a total of $75.1 million in restructuring charges and
adjustments included in gains, losses and other items in the consolidated
statement of operations. The expense includes severance and other
associate-related payments of $19.3 million, lease accruals of $19.0 million,
contract accruals of $6.7 million, asset disposal and write-offs of $29.6
million, and other related costs of $0.5 million.
The
associate-related payments of $19.3 million relate to associates in the United
States and Europe who either have been terminated or are to be
terminated. Of the $19.3 million accrued, $1.1 million remained
accrued as of September 30, 2009. These costs are expected to be paid
out in fiscal 2010.
The lease
accruals of $19.0 million were evaluated under the accounting standard which
governs exit costs. The remaining amount accrued at September 30,
2009 is $13.4 million. These liabilities will be paid out over the
remainder of the leased properties’ terms, of which the longest continues
through November 2021.
The
contract accruals of $6.7 million were evaluated under the applicable accounting
standard which requires that a liability to terminate a contract before the end
of its term be recognized when the contract is terminated in accordance with its
terms. Prior to March 31, 2008, the Company gave notice under certain
service contracts to the other parties which caused the Company to incur
termination payments under those contracts. The remaining amount
accrued of $5.8 million is expected to be paid during fiscal 2010.
During
fiscal 2006, the Company recorded a total of $13.0 million in restructuring and
other impairment charges included in gains, losses and other items in the
consolidated statement of operations. The table above includes the
portion of the above charges which are yet to be paid as of March 31,
2009. The remaining accrued costs of $0.5 million are expected to be
paid out over the terms of the related leases or contracts, of which the longest
one continues through fiscal 2012.
Collection of Hangar
Note
During
the six months ended September 30, 2008, the Company collected a note receivable
related to an aircraft storage facility. This note was not recognized
by the Company previously since collectability of the note was not
assured. During the six months ended September 30, 2008, the debtor
paid off the note in the amount of $1.0 million which was recorded in gains,
losses and other items.
10. RESTRUCTURING,
IMPAIRMENT AND OTHER CHARGES (continued):
Gains, Losses and Other
Items
Gains,
losses and other items for each of the quarters presented are as follows
(dollars in thousands):
|
|
For
the quarter ended
September
30
|
|
|
For
the six months ended
September
30
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
Gain
on disposition of operations in France
|
|
|
- |
|
|
|
(720 |
) |
|
|
- |
|
|
|
(838 |
) |
Leased
airplane disposal
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(110 |
) |
Collection
of hangar note
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,004 |
) |
Legal
contingency
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,000 |
|
Sale
of building
|
|
|
- |
|
|
|
(1,146 |
) |
|
|
- |
|
|
|
(1,146 |
) |
Restructuring
plan
|
|
|
(55 |
) |
|
|
(240 |
) |
|
|
235 |
|
|
|
(568 |
) |
Adjustment
of Spain operation closure
|
|
|
28 |
|
|
|
(264 |
) |
|
|
85 |
|
|
|
(249 |
) |
|
|
$ |
(27 |
) |
|
$ |
(2,370 |
) |
|
$ |
320 |
|
|
$ |
(2,915 |
) |
11. COMMITMENTS
AND CONTINGENCIES:
Legal
Matters
Richard
Fresco, et al. v. R.L. Polk and Company and Acxiom Corporation, (U.S. Dist.
Court, S.D. Florida, 07-60695) formerly, Linda Brooks and Richard Fresco v. Auto
Data Direct, Inc., et al., (U.S. Dist. Court, S.D. Florida, 03-61063) is a
putative class action lawsuit, removed to federal court in May 2003, filed
against Acxiom and several other information providers. The
plaintiffs allege that the defendants obtained and used drivers’ license data in
violation of the federal Drivers Privacy Protection Act. To date, a
class has not been certified. Among other things, the plaintiffs seek
injunctive relief, statutory damages, and attorneys’ fees. Acxiom has
agreed to settle the case and is seeking preliminary approval by the
court. The process of obtaining final approval of the settlement is
expected to take several months. Acxiom has accrued $5.0 million for
the settlement and ancillary costs to obtain final approval and has paid $2.5
million of this amount into an escrow fund established for the settlement,
leaving a remaining accrual of $2.5 million. Two companion cases,
Sharon Taylor, et al., v. Acxiom, et al., (U.S. District Court, E.D. Texas,
207CV001) and Sharon Taylor, et al. v. Biometric Access Company, et al., (U.S.
District Court, E.D. Texas, 2:07-CV-00018), were filed in January
2007. Both Taylor cases were dismissed by the District Court and are
now on appeal.
Epsilon
Data Management LLC, et al. v. Acxiom Corporation, (192nd
Judicial District Court of Dallas County, TX, 07-08569) is a case that was
brought by a competitor of Acxiom after the acquisition of three long-time data
providers and alleges that Acxiom breached certain terms and conditions of the
data licenses with those acquired companies in the course of building and
distributing Acxiom data products. The plaintiffs seek injunctive
relief and unspecified damages. Acxiom contends that it has acted in
conformance with the data licenses and is vigorously defending the
claims.
The
Company is involved in a number of actions with the Data Protection Authority of
Spain, involving alleged improper usage of individuals’ data. The
Company is negotiating with the Data Protection Authority in an attempt to
settle the claims, and the Company maintains that the Company’s usage of data
has been in compliance with the applicable law. However, upon advice
of counsel and after review of the pending claims, the Company accrued $3.9
million as part of the cost of closure of the Spain office. During
the quarter ended March 31, 2008, the Company reversed $2.4 million of the
accrual as some of the claims had been settled for less than the Company
originally accrued. As of September 30, 2009 the Company has a
remaining accrual for this matter of $0.5 million.
The
Company is involved in various other claims and legal actions in the ordinary
course of business. In the opinion of management, the ultimate
disposition of all of these matters will not have a material adverse effect on
the Company’s consolidated financial position, results of operations or cash
flows.
11. COMMITMENTS
AND CONTINGENCIES (continued):
Commitments
The
Company leases or licenses data processing equipment, software, office furniture
and equipment, land and office space under noncancellable operating leases or
licenses. Additionally, the Company has entered into synthetic
operating leases for computer equipment and furniture (“Leased
Assets”). These synthetic operating lease facilities are accounted
for as operating leases under generally accepted accounting principles and are
treated as capital leases for income tax reporting purposes. Initial
lease terms under the synthetic computer equipment and furniture facility range
from two to six years, with the Company having the option at expiration of the
initial lease to return the equipment, purchase the equipment at a fixed price,
or extend the term of the lease.
The
Company has a future commitment for synthetic lease payments of $1.3 million
over the next two years. In the event the Company elects to return
the Leased Assets, the Company has guaranteed a portion of the residual value to
the lessors. Assuming the Company elects to return the Leased Assets
to the lessors at its earliest opportunity under the synthetic lease
arrangements and assuming the Leased Assets have no significant residual value
to the lessors, the maximum potential amount of future payments the Company
could be required to make under these residual value guarantees was $0.4 million
at September 30, 2009.
In
connection with a certain building, the Company has entered into a 50/50 joint
venture with a local real estate developer. The Company is
guaranteeing a portion of the loan for the building. In addition, in
connection with the disposal of certain assets, the Company has guaranteed loans
for the buyers of the assets. These guarantees were made by the
Company primarily to facilitate favorable financing terms for those third
parties. Should the third parties default on this indebtedness, the
Company would be required to perform under its
guarantee. Substantially all of the third-party indebtedness is
collateralized by various pieces of real property. At September 30,
2009 the Company’s maximum potential future payments under this guarantee of
third-party indebtedness was $2.5 million.
12. INCOME
TAX
In
determining the quarterly provision for income taxes, the Company makes its best
estimate of the effective tax rate expected to be applicable for the full fiscal
year. The anticipated effective tax rate for fiscal 2010 is 40.5%.
At
September 30, 2009, the Company had $5.5 million in gross unrecognized tax
benefits, which is included in other liabilities on the balance sheet. This
entire amount, if recognized, would impact the effective tax rate. The total
amount of accrued interest and penalties for such unrecognized tax
benefits, and included in the amount above, is $0.8 million. It is reasonably
possible that the amount of unrecognized tax benefit with respect to the
Company's uncertain tax positions will increase or decrease during the next 12
months. However, management does not expect the change to have a significant
effect on consolidated results of operations or financial position.
13. FINANCIAL
INSTRUMENTS:
The
following methods and assumptions were used to estimate the fair value of each
class of financial instruments for which it is practicable to estimate that
value.
Cash and
cash equivalents, trade receivables, unbilled and notes receivable, short-term
borrowings and trade payables—The carrying amount approximates fair value
because of the short maturity of these instruments.
Long-term
debt—The interest rate on the term loan and revolving credit agreement is
adjusted for changes in market rates and therefore the carrying value of these
loans approximates fair value. The estimated fair value of other
long-term debt was determined based upon the present value of the expected cash
flows considering expected maturities and using interest rates currently
available to the Company for long-term borrowings with similar
terms. At September 30, 2009, the estimated fair value of long-term
debt approximates its carrying value.
Derivative
instruments included in other liabilities—The carrying value is adjusted to fair
value through other comprehensive income at each balance sheet
date. The fair value is determined from an interest-rate futures
model.
13. FINANCIAL
INSTRUMENTS (continued):
Under
applicable accounting standards, financial assets and liabilities are classified
in their entirety based on a hierarchy using the lowest level of
input that is significant to the fair value measurements. The Company assigned
assets and liabilities to Level 1—quoted prices in active markets for identical
assets or liabilities, Level 2—significant other observable inputs and Level
3—significant unobservable inputs.
The
following table presents the balances of assets and liabilities measured at fair
value as of September 30, 2009 (dollars in thousands):
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
current assets
|
|
$ |
11,284 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
11,284 |
|
Total
assets
|
|
$ |
11,284 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
11,284 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
current liabilities
|
|
$ |
11,284 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
11,284 |
|
Long-term
debt
|
|
|
- |
|
|
|
1,499 |
|
|
|
- |
|
|
|
1,499 |
|
Other
liabilities
|
|
|
- |
|
|
|
3,629 |
|
|
|
- |
|
|
|
3,629 |
|
Total
liabilities
|
|
$ |
11,284 |
|
|
$ |
5,128 |
|
|
$ |
- |
|
|
$ |
16,412 |
|
14. SUBSEQUENT
EVENTS:
On
September 17, 2009, the Company entered into an agreement to purchase 51% of a
direct marketing business operating in Saudi Arabia and the United Arab
Emirates. The acquisition is expected to close in the quarter ending
December 31, 2009. The purchase price is $3.8 million to be paid in
cash, not including the amount, if any, to be paid pursuant to an earnout
agreement which will be determined based on the operating results of the
business from October 31, 2009 through December 31, 2012. The
purchased business has estimated annual revenues of approximately $6
million.
PART
I. FINANCIAL INFORMATION
Item
2. Management’s Discussion and Analysis of Financial Condition and
Results of Operations
Introduction and
Overview
At Acxiom
(“Acxiom” or “the Company”) (Nasdaq: ACXM), we provide global interactive
marketing services for the world’s leading companies to help them solve some of
their most complex marketing problems. Our products, services and thought
leadership enable them to acquire new customers, retain their most valuable
customers, communicate with customers in the methods and times they prefer, and
make profitable marketing and business decisions. Acxiom’s unmatched
customer insight is achieved by blending the world’s largest repository of
consumer data, award-winning technology and analytics, multi-channel expertise,
privacy leadership, and superior knowledge of a wide spectrum of
industries. Founded in 1969, Acxiom is headquartered in Little Rock,
Arkansas, with locations throughout the United States (“US”) and Europe, and in
Australia and China.
Highlights
of the quarter ended September 30, 2009 are identified below.
·
|
Revenue
of $271.1 million, a decrease of 17.6 percent from $328.9 million in the
second fiscal quarter a year ago.
|
·
|
Revenue
increased $15.1 million, or 5.9% compared to the first quarter of the
current fiscal year. This represents the first sequential
quarter revenue increase since the third quarter of fiscal
2008.
|
·
|
Income
from operations of $21.2 million, a $13.0 million decrease compared to
$34.3 million in the second fiscal quarter last
year.
|
·
|
Pre-tax
earnings of $16.0 million, compared to $26.0 million in the second quarter
of fiscal 2009.
|
·
|
Diluted
earnings per share of $0.12, compared to diluted earnings per share of
$0.20 in the second fiscal quarter last
year.
|
·
|
Operating
cash flow of $60.7 million.
|
These
highlights are not intended to be a full discussion of the Company’s results for
the quarter. These highlights should be read in conjunction with the
following discussion of Results of Operations and Capital Resources and
Liquidity and with the Company’s condensed consolidated financial statements and
footnotes accompanying this report.
Results of
Operations
A summary
of selected financial information for each of the periods reported is presented
below (dollars in millions, except per share amounts):
|
|
For
the quarter ended
September
30
|
|
|
For
the six months ended
September
30
|
|
|
|
2009
|
|
|
2008
|
|
|
%
Change
|
|
|
2009
|
|
|
2008
|
|
|
%
Change
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services
|
|
$ |
210.2 |
|
|
$ |
233.6 |
|
|
|
(10)% |
|
|
$ |
409.5 |
|
|
$ |
470.3 |
|
|
|
(13)% |
|
Products
|
|
|
60.9 |
|
|
|
95.3 |
|
|
|
(36)% |
|
|
|
117.6 |
|
|
|
189.7 |
|
|
|
(38)% |
|
|
|
$ |
271.1 |
|
|
$ |
328.9 |
|
|
|
(18)% |
|
|
$ |
527.1 |
|
|
$ |
660.0 |
|
|
|
(20)% |
|
Total
operating costs and expenses
|
|
|
249.9 |
|
|
|
294.6 |
|
|
|
(15)% |
|
|
|
493.3 |
|
|
|
600.1 |
|
|
|
(18)% |
|
Income
from operations
|
|
$ |
21.2 |
|
|
$ |
34.3 |
|
|
|
(38)% |
|
|
$ |
33.8 |
|
|
$ |
59.9 |
|
|
|
(44)% |
|
Diluted
earnings per share
|
|
$ |
0.12 |
|
|
$ |
0.20 |
|
|
|
(40)% |
|
|
$ |
0.17 |
|
|
$ |
0.34 |
|
|
|
(50)% |
|
Revenues
Services
revenue for the quarter ended September 30, 2009 was $210.2
million. This represents a $23.4 million decrease or 10.0% when
compared to the same period in the prior year. On a geographic basis,
International services decreased approximately $0.5 million while US services
decreased approximately $22.9 million. Excluding the impact of
unfavorable exchange rate movement, International services increased $2.1
million which was due to strong performance in the United Kingdom. By
line of business, revenue declined in most areas including a $22.1 million
decrease in CDI and Multi-channel Marketing Services. Of the $22.1
million decline in CDI and Multi-channel Marketing Services, the Financial
Services vertical accounted for a large portion of the decline. Over
the last year, revenue reductions have occurred due to contract renegotiations
for reduced amounts, lost contracts, volume reductions and contracts terminated
because of economic issues However, for the first time in several
quarters services revenue increased compared to the most recent sequential
quarter. Infrastructure Management revenue was relatively flat,
however it was positively impacted by the recent signing of a large new
arrangement.
Services
revenue for the six months ended September 30, 2009 was $409.5
million. This represents a $60.8 million decrease or 12.9% when
compared to the same period in the prior year. On a geographic basis,
International services decreased approximately $5.2 million while US services
decreased approximately $55.5 million. Approximately $6.9 million of
the International services decrease was due to unfavorable exchange rate
movement. US services revenue was positively impacted by prior-year
acquisitions which contributed $4.9 million to services revenue in the
quarter. By line of business, revenue declined in most areas
including a CDI and Multi-channel Marketing Services decrease of $47.1 million
and Infrastructure Management decrease of $9.8 million. Of the $47.1
million decline in CDI and Multi-channel Marketing Services, the Financial
Services vertical accounted for a large portion of the decline. Over
the last year, revenue reductions have occurred due to contract renegotiations
for reduced amounts, lost contracts, volume reductions and contracts terminated
because of economic issues. The decline in Infrastructure Management
services as well as the CDI and Multi-channel Marketing Services decline in
other industry verticals was driven by similar issues.
Products
revenue for the quarter ended September 30, 2009 was $60.9
million. This represents a $34.4 million decrease or 36.1% when
compared to the same period in the prior year. During the fourth
quarter of fiscal 2009, a large pass-through data contract was amended and as
such the revenue is no longer reported on a gross basis. Excluding
the pass-through revenue related to this contract, products revenue was down
$12.9 million, or 17.5%. The International operations declined $7.2
million of which $1.2 million was due to the impact of exchange
rates. International operations were impacted by much lower ad hoc
and project activity. The remaining $5.7 million decline was due to
contract renegotiations for reduced amounts, lost contracts, volume reductions
and contracts terminated because of economic issues in US industry
verticals.
Products
revenue for the six months ended September 30, 2009 was $117.6
million. This represents a $72.2 million decrease or 38.0% when
compared to the same period in the prior year. Excluding the
pass-through revenue related to the amended data contract, products revenue was
down $28.4 million, or 19.5%. The International operations declined
$17.4 million of which $3.9 million was due to the impact of exchange
rates. International operations were impacted by much lower ad hoc
and project activity. The remaining $11.0 million decline was due to
contract renegotiations for reduced amounts, lost contracts, volume reductions
and contracts terminated because of economic issues in US industry
verticals.
Operating
Costs and Expenses
The
following table presents the Company’s operating costs and expenses for each of
the periods presented (dollars in millions):
|
|
For
the quarter ended
September
30
|
|
|
For
the six months ended
September
30
|
|
|
|
2009
|
|
|
2008
|
|
|
%
Change
|
|
|
2009
|
|
|
2008
|
|
|
%
Change
|
|
Cost
of revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services
|
|
$ |
165.8 |
|
|
$ |
181.0 |
|
|
|
(8)% |
|
|
$ |
325.4 |
|
|
$ |
359.8 |
|
|
|
(10)% |
|
Products
|
|
|
46.1 |
|
|
|
77.0 |
|
|
|
(40)% |
|
|
|
92.0 |
|
|
|
154.8 |
|
|
|
(41)% |
|
Total
cost of revenue
|
|
$ |
211.9 |
|
|
$ |
258.0 |
|
|
|
(18)% |
|
|
$ |
417.4 |
|
|
$ |
514.6 |
|
|
|
(19)% |
|
Selling,
general and
Administrative
|
|
|
38.0 |
|
|
|
39.0 |
|
|
|
(3)% |
|
|
|
75.6 |
|
|
|
88.4 |
|
|
|
(15)% |
|
Gains,
losses and other items, net
|
|
|
- |
|
|
|
(2.4 |
) |
|
|
100% |
|
|
|
0.3 |
|
|
|
(2.9 |
) |
|
|
111% |
|
Total
operating costs
and
expenses
|
|
$ |
249.9 |
|
|
$ |
294.6 |
|
|
|
(15)% |
|
|
$ |
493.3 |
|
|
$ |
600.1 |
|
|
|
(18)
% |
|
|
|
For
the quarter ended
September
30
|
|
|
For
the six months ended
September
30
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
Gross
profit margin
|
|
|
|
|
|
|
|
|
|
|
|
|
Services
|
|
|
21.1% |
|
|
|
22.5% |
|
|
|
20.6% |
|
|
|
23.5% |
|
Products
|
|
|
24.2 |
|
|
|
19.2 |
|
|
|
21.7 |
|
|
|
18.4 |
|
Total
gross profit margin
|
|
|
21.8% |
|
|
|
21.6% |
|
|
|
20.8% |
|
|
|
22.0% |
|
Operating
profit margin
|
|
|
7.8% |
|
|
|
10.4% |
|
|
|
6.4% |
|
|
|
9.1% |
|
Cost of
services revenue of $165.8 million for the quarter ending September 30, 2009
represents a decrease of $15.2 million compared to the same quarter a year
ago. Gross margin for services revenue decreased from 22.5% to
21.1%. Cost of services revenue of $325.4 million for the six months
ended September 30, 2009 represents a decrease of $34.5 million compared to the
same period a year ago. Gross margin for services revenue decreased
from 23.5% to 20.6%. Margin decline was due to significant revenue
declines in the current fiscal year. Operating expenses have been
reduced significantly as revenues have declined. However, due to the
reduction in volume-based revenue, margins have suffered. The margin
impact on this volume-based business has been mitigated by efficiency
improvements in data processing and delivery operations.
Cost of
products revenue of $46.1 million for the quarter ending September 30, 2009
represents a decrease of $30.9 million compared to the same quarter a year
ago. Products revenue gross margins increased from 19.2% a year ago
to 24.2% in this quarter. Excluding pass-through data and related
costs in the prior year of $21.5 million, product costs actually decreased
approximately 16.9% and margins on non-pass-through products decreased to 24.2%
from 24.8% a year ago. Cost of products revenue of $92.0 million for
the six months ending September 30, 2009 represents a decrease of $62.7 million
compared to the same six-month period a year ago. Products revenue
gross margins increased from 18.4% a year ago to 21.7%. Excluding
pass-through data and related costs in the prior year of $43.8 million, product
costs actually decreased approximately 17.1% and margins on non-pass-through
products decreased to 21.7% from 23.9% a year ago. Although costs
have been reduced significantly, the fixed cost structure of the product segment
impacts margins to a greater extent as revenue declines.
Selling,
general, and administrative expenses were $38.0 million for the quarter ended
September 30, 2009. This represents a $1.0 million decrease over the
prior-year quarter. As a percent of total revenue, these expenses
were 14.0% compared to 11.9% a year ago. Selling, general, and
administrative expenses were $75.6 million for the six months ended September
30, 2009. This represents a $12.9 million decrease over the
prior-year period. As a percent of total revenue, these expenses are
14.3% compared to 13.4% a year ago. Current year expenses reflect
ongoing cost savings initiated in fiscal 2009.
Other
Income (Expense)
Interest
expense for the quarter ended September 30, 2009 was $5.4 million compared to
$8.6 million a year ago due primarily to a $21.0 million decline in the average
term loan debt balance and a decline of approximately 170 basis points on the
term loan average interest rate. Interest expense for the six months
ended September 30, 2009 was $10.9 million compared to $18.1 million a year ago
due primarily to a $22.0 million decline in the average term loan debt balance
and a decline of approximately 175 basis points on the term loan average
interest rate.
Other
expense decreased to $0.1 million in the six months ended September 30,
2009. The prior year included a $1.1 million gain from a real estate
joint venture.
Income
taxes
The
anticipated effective tax rate for fiscal 2010 is 40.5%. The
prior-year rate was 39%.
Capital Resources and
Liquidity
Working
Capital and Cash Flow
Working
capital at September 30, 2009 totaled $211.5 million compared to $204.5 million
at March 31, 2009. Total current assets decreased $11.3 million due
to decreases in cash and cash equivalents of $9.5 million, refundable income
taxes of $4.6 million, and trade accounts receivable of $2.2 million; offset by
an increase in other current assets of $5.1 million. Current
liabilities decreased $18.3 million due to decreases in deferred revenue of $4.9
million and payroll accruals of $20.4 million; offset by increases in changes in
current installments of long-term debt of $2.7 million and trade accounts
payable of $4.5 million. The Company made a $30 million pre-payment
on its term loan during the quarter ended September 30, 2009.
Accounts
receivable days sales outstanding (“DSO”) was 62 days at September 30, 2009 and
was 56 days at March 31, 2009, and is calculated as follows (dollars in
thousands):
|
|
September
30,
2009
|
|
|
March
31,
2009
|
|
Numerator
– trade accounts receivable, net
|
|
$ |
182,612 |
|
|
$ |
184,814 |
|
Denominator:
|
|
|
|
|
|
|
|
|
Quarter
revenue
|
|
|
271,105 |
|
|
|
295,509 |
|
Number
of days in quarter
|
|
|
92 |
|
|
|
90 |
|
Average
daily revenue
|
|
$ |
2,947 |
|
|
$ |
3,283 |
|
Days
sales outstanding
|
|
|
62 |
|
|
|
56 |
|
Net cash
provided by operating activities for the current year declined 33.3% to $76.9
million. The decrease in net earnings of $12.9 million, decrease in
depreciation and amortization of $22.9 million and decrease in change in other
assets of $17.4 million was offset by an increase in changes in accounts
receivable of $13.1 million.
Investing
activities used $35.1 million in cash in the current year. This
included capitalization of data acquisition costs of $8.8 million and
capitalization of software development costs of $4.8 million. Capital
expenditures were $21.9 million for the current year. Additionally,
the Company received $0.4 million in refunded cash from an escrow account set up
for the acquisition of Precision Marketing. The Company acquired
$10.4 million of property under capital leases. Payments under these
arrangements will be reflected in future cash flows as payments of
debt. Prior-year investing activities included $2.6 million cash
received from investments, $24.2 million from the sale of assets and $2.0
million received from the sale and license of software.
Cash
flows from financing activities include payments of debt of $55.1 million,
including capital lease payments of $15.3 million, software license payments of
$5.7 million, other debt payments of $4.1 million and a term loan debt
prepayment of $30.0 million. Financing activities also include $2.7
million in proceeds from the sale of stock and $0.3 million for the payment for
shares of treasury stock that were purchased in fiscal
2009. Prior-year financing activities also included dividends paid of
$9.3 million.
Credit
and Debt Facilities
Effective
September 15, 2006, the Company entered into an amended and restated credit
agreement allowing (1) term loans up to an aggregate principal amount of $600
million and (2) revolving credit facility borrowings consisting of revolving
loans, letter of credit participations and swing-line loans up to an aggregate
amount of $200 million. On September 15, 2006, the Company borrowed
the entire amount of the term loan. The term loan is payable in
quarterly principal installments of $1.5 million through September 2011,
followed by quarterly principal installments of $111.4 million through September
2012. The term loan also allows prepayments before
maturity. Revolving loan commitments and all borrowings of revolving
loans mature on September 15, 2011. The credit agreement is secured
by the accounts receivable of Acxiom and its domestic subsidiaries, as well as
by the outstanding stock of certain Acxiom subsidiaries. At September
30, 2009 there were no revolving credit borrowings
outstanding. Borrowings under the revolving credit agreement bear
interest at LIBOR plus 1.5%, an alternative base rate, or at the federal funds
rate plus 2.25%.
Off-Balance
Sheet Items and Commitments
The
Company has entered into synthetic operating lease facilities for computer
equipment and furniture (“Leased Assets”). These synthetic operating
lease facilities are accounted for as operating leases under GAAP and are
treated as capital leases for income tax reporting purposes. Lease
terms under the computer equipment and furniture facility range from two to six
years, with the Company having the option at expiration of the initial term to
return, or purchase at a fixed price, or extend or renew the term of the leased
equipment. In the event the Company elects to return the Leased
Assets, the Company has guaranteed a portion of the residual value to the
lessors. Assuming the Company elects to return the Leased Assets to
the lessors at its earliest opportunity under the synthetic lease arrangements
and assuming the Leased Assets have no significant residual value to the
lessors, the maximum potential amount of future payments the Company could be
required to make under these residual value guarantees was $0.4 million at
September 30, 2009. As of September 30, 2009 the Company has a future
commitment for synthetic lease payments of $1.3 million over the next two
years.
In
connection with a certain building, the Company has entered into a 50/50 joint
venture with a local real estate developer. The Company is
guaranteeing a portion of the loan for the building. In addition, in
connection with the disposal of certain assets, the Company has guaranteed loans
for the buyers of the assets. Substantially all of the third party
indebtedness for which the Company has provided guarantees is collateralized by
various pieces of real property. The aggregate amount of the
guarantees at September 30, 2009 was $2.5 million.
Outstanding
letters of credit which reduce the borrowing capacity under the Company’s
revolving credit were $12.5 million at September 30, 2009.
Contractual
Commitments
The
following table presents Acxiom’s contractual cash obligations, exclusive of
interest, and purchase commitments at September 30, 2009 (dollars in
thousands). The table does not include the future payment of gross
unrealized tax benefit liabilities of $5.5 million or the future payment, if
any, against the Company’s non-current interest rate swap liability of $3.6
million as the Company is not able to predict the periods in which these
payments will be made. The column for 2010 represents the six months ending
March 31, 2010. All other columns represent fiscal years ending March
31.
|
|
For
the years ending March 31
|
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
Thereafter
|
|
|
Total
|
|
Capital
lease and installment payment obligations
|
|
$ |
13,577 |
|
|
$ |
12,245 |
|
|
$ |
4,361 |
|
|
$ |
1,352 |
|
|
$ |
631 |
|
|
$ |
9,696 |
|
|
$ |
41,862 |
|
Software
and data license liabilities
|
|
|
2,104 |
|
|
|
4,059 |
|
|
|
2,625 |
|
|
|
1,461 |
|
|
|
- |
|
|
|
- |
|
|
|
10,249 |
|
Warrant
liability
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,499 |
|
|
|
1,499 |
|
Other
long-term debt
|
|
|
4,069 |
|
|
|
19,498 |
|
|
|
227,380 |
|
|
|
229,687 |
|
|
|
- |
|
|
|
- |
|
|
|
480,634 |
|
Total
long-term obligations
|
|
|
19,750 |
|
|
|
35,802 |
|
|
|
234,366 |
|
|
|
232,500 |
|
|
|
631 |
|
|
|
11,195 |
|
|
|
534,244 |
|
Synthetic
equipment and furniture leases
|
|
|
1,186 |
|
|
|
125 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,311 |
|
Equipment
operating leases
|
|
|
1,587 |
|
|
|
817 |
|
|
|
225 |
|
|
|
62 |
|
|
|
10 |
|
|
|
- |
|
|
|
2,701 |
|
Building
operating leases
|
|
|
13,553 |
|
|
|
20,954 |
|
|
|
14,835 |
|
|
|
11,795 |
|
|
|
10,377 |
|
|
|
37,942 |
|
|
|
109,456 |
|
Total
operating lease payments
|
|
|
16,326 |
|
|
|
21,896 |
|
|
|
15,060 |
|
|
|
11,857 |
|
|
|
10,387 |
|
|
|
37,942 |
|
|
|
113,468 |
|
Total
contractual cash obligations
|
|
$ |
36,076 |
|
|
$ |
57,698 |
|
|
$ |
249,426 |
|
|
$ |
244,357 |
|
|
$ |
11,018 |
|
|
$ |
49,137 |
|
|
$ |
647,712 |
|
|
|
For
the years ending March 31
|
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
Thereafter
|
|
|
Total
|
|
Purchase
commitments on synthetic equipment and furniture leases
|
|
|
1,527 |
|
|
|
215 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,742 |
|
Other
purchase commitments
|
|
|
51,643 |
|
|
|
41,797 |
|
|
|
31,410 |
|
|
|
18,284 |
|
|
|
9,764 |
|
|
|
17,197 |
|
|
|
170,095 |
|
Total
purchase commitments
|
|
$ |
53,170 |
|
|
$ |
42,012 |
|
|
$ |
31,410 |
|
|
$ |
18,284 |
|
|
$ |
9,764 |
|
|
$ |
17,197 |
|
|
$ |
171,837 |
|
The
purchase commitments on the synthetic equipment and furniture leases assume the
leases terminate and are not renewed, and the Company elects to purchase the
assets. The other purchase commitments include contractual
commitments for the purchase of data and open purchase orders for equipment,
paper, office supplies, construction and other items. Other purchase
commitments in some cases will be satisfied by entering into future operating
leases, capital leases, or other financing arrangements, rather than payment of
cash.
The
following table shows contingencies or guarantees under which the Company could
be required, in certain circumstances, to make cash payments as of September 30,
2009 (dollars in thousands):
Residual
value guarantee on the synthetic computer equipment and furniture
leases
|
|
$ |
377 |
|
Guarantee
on certain partnership and other loans
|
|
|
2,529 |
|
Outstanding
letters of credit
|
|
|
12,519 |
|
The total
of partnership and other loans of which the Company guarantees the portion noted
in the above table is $7.0 million as of September 30, 2009.
While the
Company does not have any other material contractual commitments for capital
expenditures, certain levels of investments in facilities and computer equipment
continue to be necessary to support the growth of the business. In
some cases, the Company also sells software and hardware to
clients. In addition, new outsourcing or facilities management
contracts frequently require substantial up-front capital expenditures to
acquire or replace existing assets. Management believes that the
Company’s existing available debt and cash flow from operations will be
sufficient to meet the Company’s working capital and capital expenditure
requirements for the foreseeable future. The Company also evaluates
acquisitions from time to time, which may require up-front payments of
cash. Depending on the size of the acquisition it may be necessary to
raise additional capital. If additional capital becomes necessary as
a result of any material variance of operating results from projections or from
potential future acquisitions, the Company would first use available borrowing
capacity under its revolving credit agreement, followed by the issuance of debt
or equity securities. However, no assurance can be given that the
Company would be able to obtain funding through the issuance of debt or equity
securities at terms favorable to the Company, or that such funding would be
available.
For a
description of certain risks that could have an impact on results of operations
or financial condition, including liquidity and capital resources, see “Risk
Factors” contained in Part I, Item 1A, of the Company’s 2009 Annual
Report.
Non-U.S.
Operations
The
Company has a presence in the United Kingdom, France, the Netherlands, Germany,
Portugal, Poland, Australia and China. Most of the Company’s
exposure to exchange rate fluctuation is due to translation gains and losses as
there are no material transactions that cause exchange rate
impact. In general, each of the foreign locations is expected to fund
its own operations and cash flows, although funds may be loaned or invested from
the U.S. to the foreign subsidiaries subject to limitations in the Company’s
revolving credit facility. These advances are considered to be
long-term investments, and any gain or loss resulting from changes in exchange
rates as well as gains or losses resulting from translating the foreign
financial statements into U.S. dollars are included in accumulated other
comprehensive income (loss). Exchange rate movements of foreign
currencies may have an impact on the Company’s future costs or on future cash
flows from foreign investments. The Company has not entered into any
foreign currency forward exchange contracts or other derivative instruments to
hedge the effects of adverse fluctuations in foreign currency exchange
rates.
Critical Accounting
Policies
We
prepare our consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America. These
accounting principles require management to make certain judgments and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities as of the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. The consolidated financial statements in the
Company’s 2009 Annual Report include a summary of significant accounting
policies used in the preparation of Acxiom’s consolidated financial
statements. In addition, the Management’s Discussion and Analysis
filed as part of the 2009 Annual Report contains a discussion of the policies
which management has identified as the most critical because they require
management’s use of complex and/or significant judgments. None of the
Company’s critical accounting policies have materially changed since the date of
the last annual report.
New Accounting
Pronouncements
In
December 2007, the FASB issued Statement of Financial Accounting Standards No.
141(R), “Business Combinations,” (“SFAS 141R”), which replaces SFAS
141. SFAS 141R has subsequently been codified in the FASB Accounting
Standards Codification Topic 805 (“ASC 805”). ASC 805 requires most
assets acquired and liabilities assumed in a business combination, contingent
consideration, and certain acquired contingencies to be measured at their fair
values as of the date of acquisition. The new standard also requires
that acquisition-related costs and restructuring costs be recognized separately
from the business combination. The new standard is effective for the
Company for fiscal year 2010 and will be effective for business combinations
entered into this fiscal year.
In
December 2007, the FASB issued Statement of Financial Accounting Standards No.
160, “Noncontrolling Interest in Consolidated Financial Statements”, (“SFAS
160”). SFAS 160 has subsequently been codified in the FASB Accounting
Standards Codification Topic 810 (“ASC 810”). The new standard amends
previous accounting standards to establish new accounting and reporting
standards for the noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary. The new standard is effective for
the Company this fiscal year.
The
FASB’s Emerging Issues Task Force has issued new accounting guidance for revenue
arrangements with multiple deliverables. Under current accounting
guidance, one of the requirements for recognition of revenue for a delivered
item under a multiple element arrangement is that there must be objective and
verifiable evidence of the standalone selling price of the undelivered
item. The new guidance eliminates that requirement and requires an
entity to estimate the selling price of each element in the
arrangement. The result will likely be that more arrangements will be
separated into multiple elements of accounting than was previously the
case.
The new
guidance is effective for the Company as of April 1, 2011 and must be applied
prospectively to new arrangements entered into beginning on that
date. Early adoption is permitted as of the beginning of a fiscal
year. If the new guidance is adopted early in a period other than the
first period of the fiscal year, the guidance must be adopted retrospectively to
the beginning of the fiscal year of adoption. Retrospective
application to prior years is allowed, but not required. In the
initial year of application, certain qualitative and quantitative disclosures
about the impact of the adoption are required.
The
Company has not yet determined the impact of adoption, although management
believes that the new guidance will generally require separation of more units
of accounting than under the current accounting guidance. The Company
has not yet determined whether to adopt as of the required adoption date or to
adopt in an earlier period.
Forward-looking
Statements
This
document contains forward-looking statements. These statements, which
are not statements of historical fact, may contain estimates, assumptions,
projections and/or expectations regarding the Company’s financial position,
results of operations, market position, product development, growth
opportunities, economic conditions, and other similar forecasts and statements
of expectation. The Company indicates these statements by words or
phrases such as “anticipate,” “estimate,” “plan,” “expect,” “believe,” “intend,”
“foresee,” and similar words or phrases. These forward-looking
statements are not guarantees of future performance and are subject to a number
of factors and uncertainties that could cause the Company’s actual results and
experiences to differ materially from the anticipated results and expectations
expressed in the forward-looking statements.
Forward-looking
statements may include but are not limited to the following:
·
|
that
the amounts for restructuring and impairment charges and accruals for
litigation will be within estimated
ranges;
|
·
|
that
the cash flows used in estimating the recoverability of assets will be
within the estimated ranges; and
|
·
|
that
items which management currently believes are not material will continue
to not be material in the future.
|
The
factors and uncertainties that could cause actual results to differ materially
from those expressed in, or implied by, forward-looking statements include but
are not limited to the following:
·
|
the
risk factors described in Part I, “Item 1A. Risk Factors” included in the
Company’s 2009 Annual Report and in this report and those described from
time to time in our future reports filed with the Securities and Exchange
Commission;
|
·
|
the
possibility that certain contracts may not generate the anticipated
revenue or profitability or may not be closed within the anticipated time
frames;
|
·
|
the
possibility that significant customers may experience extreme, severe
economic difficulty or otherwise reduce the amount of business they do
with us;
|
·
|
the
possibility that we will not successfully complete customer contract
requirements on time or meet the service levels specified in the
contracts, which may result in contract penalties or lost
revenue;
|
·
|
the
possibility that we may not be able to attract, retain or motivate
qualified technical, sales and leadership associates, or that we may lose
key associates to other
organizations;
|
·
|
the
possibility that we will not be able to continue to receive credit upon
satisfactory terms and conditions;
|
·
|
the
possibility that negative changes in economic conditions in general or
other conditions might lead to a reduction in demand for our products and
services;
|
·
|
the
possibility that there will be changes in consumer or business information
industries and markets that negatively impact the
company;
|
·
|
the
possibility that the historical seasonality of our business may
change;
|
·
|
the
possibility that we will not be able to achieve cost reductions and avoid
unanticipated costs;
|
·
|
the
possibility that the fair value of certain of our assets may not be equal
to the carrying value of those assets now or in future time
periods;
|
·
|
the
possibility that changes in accounting pronouncements may occur and may
impact these forward-looking statements;
and
|
·
|
the
possibility that we may encounter difficulties when entering new markets
or industries.
|
With
respect to the provision of products or services outside our primary base of
operations in the United States, all of the above factors apply, along with the
difficulty of doing business in numerous sovereign jurisdictions due to
differences in scale, competition, culture, laws and regulations.
Other
factors are detailed from time to time in periodic reports and registration
statements filed with the United States Securities and Exchange Commission. The
Company believes that we have the product and technology offerings, facilities,
associates and competitive and financial resources for continued business
success, but future revenues, costs, margins and profits are all influenced by a
number of factors, including those discussed above, all of which are inherently
difficult to forecast.
In light
of these risks, uncertainties and assumptions, the Company cautions readers not
to place undue reliance on any forward-looking statements. The
Company undertakes no obligation to publicly update or revise any
forward-looking statements based on the occurrence of future events, the receipt
of new information or otherwise.
Item
3. Quantitative and Qualitative Disclosure about Market
Risk
Acxiom’s
earnings are affected by changes in short-term interest rates primarily as a
result of its term loan and revolving credit agreement, which bears interest at
a floating rate. Acxiom currently uses an interest-rate swap
agreement to mitigate the changes in interest rate risk on $95 million of its
variable interest debt. Risk can be estimated by measuring the impact
of a near-term adverse movement of one percentage point in short-term market
interest rates. If short-term market interest rates increase one
percentage point during the next four quarters compared to the previous four
quarters, there would be no material adverse impact on Acxiom’s results of
operations. Acxiom has no material future earnings or cash flow
expenses from changes in interest rates related to its other long-term debt
obligations as substantially all of Acxiom’s remaining long-term debt
instruments have fixed rates. At both September 30, 2009 and March
31, 2009, the fair value of Acxiom’s fixed rate long-term debt approximated
carrying value.
The
Company has a presence in the United Kingdom, France, The Netherlands, Germany,
Portugal, Poland, Australia and China. In general, each of the
foreign locations is expected to fund its own operations and cash flows,
although funds may be loaned or invested from the U.S. to the foreign
subsidiaries. Therefore, exchange rate movements of foreign
currencies may have an impact on Acxiom’s future costs or on future cash flows
from foreign investments. Acxiom, at this time, has not entered into
any foreign currency forward exchange contracts or other derivative instruments
to hedge the effects of adverse fluctuations in foreign currency exchange
rates.
Item
4. Controls and Procedures
(a)
|
Evaluation
of Disclosure Controls and
Procedures.
|
As of
September 30, 2009 under the supervision and with the participation of our
management, including our Chief Executive Officer (our principal executive
officer) and our Chief Financial Officer (our principal financial officer), we
evaluated the effectiveness of our disclosure controls and procedures (as
defined under Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”)). Based on this evaluation, our Chief Executive Officer and
our Chief Financial Officer concluded that, as of September 30, 2009 our
disclosure controls and procedures were effective.
(b)
|
Changes
in Internal Control over Financial
Reporting
|
There
have been no changes in our internal control over financial reporting that
occurred during the six months ended September 30, 2009 that have materially
affected, or are reasonably likely to materially affect, such internal control
over financial reporting.
PART
II. OTHER INFORMATION
Item 1.
|
Legal
Proceedings
|
The
Company is involved in various claims and litigation matters that arise in the
ordinary course of the business. None of these, however, are believed
to be material in their nature or scope, except those incorporated by reference
under this Part II, Item 1.
Refer to
the discussion of certain legal proceedings pending against the Company under
Part I, Item 1, Notes to Condensed Consolidated Financial Statements, Note 11
Commitments and Contingencies, which discussion is incorporated herein by
reference.
Item
4. Submission of Matters to a Vote of Security
Holders
(a) The
Annual Meeting of Shareholders of the Company was held on August 19,
2009.
(c) At
the meeting, the shareholders voted on the following two proposals:
|
1)
|
A
proposal for the election of four directors – Voting results for each
individual nominee were as follows: Michael J. Durham – 64,938,158 votes
for, 6,311,160 votes against, and 76,278 votes abstained; Ann Die Hasselmo
– 65,954,413 votes for, 5,302,477 votes against, and 68,706 votes
abstained; William J. Henderson – 66,727,141 votes for, 4,529,262 votes
against, and 69,193 votes abstained; and John A. Meyer – 66,276,735 votes
for, 4,974,290 votes against, and 74,571 votes
abstained. .
|
|
2)
|
A
proposal to ratify the independent auditors of the Company – Voting
results for this proposal were as follows: 70,155,306 votes
for; 1,103,645 votes against, 66,645 votes abstained, and 0 broker non
votes.
|
Item
6. Exhibits
(a) The
following exhibits are filed with this Report:
|
31(a)
|
Certification
of Chief Executive Officer (principal executive officer) pursuant to SEC
Rule 13a-14(a)/15d-14(a), as adopted pursuant to Sections 302 and 404 of
the Sarbanes-Oxley Act of 2002
|
|
31(b)
|
Certification
of Chief Financial Officer (principal financial and accounting officer)
pursuant to SEC Rule 13a-14(a)/15d-14(a), as adopted pursuant to Sections
302 and 404 of the Sarbanes-Oxley Act of
2002
|
|
32(a)
|
Certification
of Chief Executive Officer (principal executive officer) pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|
|
32(b)
|
Certification
of Chief Financial Officer (principal financial and accounting officer)
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
|
ACXIOM
CORPORATION AND SUBSIDIARIES
SIGNATURE
Pursuant
to the requirements of the Securities and Exchange Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Acxiom
Corporation
Dated: November
6, 2009
By:
/s/Christopher W.
Wolf
(Signature)
Christopher
W. Wolf
Chief
Financial Officer
(principal
financial and accounting officer)