Acxiom(R) Corporation (Nasdaq: ACXM) today announced financial
results for the second quarter of fiscal 2006 ended September 30,
2005. Revenue for the quarter was $330.5 million, income from
operations was $18.8 million, pre-tax earnings were $12.4 million,
and diluted earnings per share (EPS) were $.08. These results
include the impact of net pre-tax charges of $15.8 million
associated with the restructuring plan, the sale of non-strategic
operations and two unusual items explained below. The impact of
these items on net earnings after tax was $10.4 million, which
reduced diluted EPS by $.12 for the quarter. Acxiom will hold a
conference call at 4:30 p.m. CDT today to discuss this information
further. Interested parties are invited to listen to the call,
which will be broadcast via the Internet at www.acxiom.com. "During
our second quarter, we saw 11 percent year-over-year revenue
improvement, the expense-reduction initiative we announced in June
produced better than expected results, our business in Europe
improved, and we signed a number of large, new deals," Company
Leader Charles D. Morgan said. "These results give us an
encouraging outlook for the third and fourth quarters." An overview
of Acxiom's second-quarter performance includes: -0- *T -- Revenue
of $330.5 million, up 11 percent from $299.1 million in the second
quarter a year ago. The net impact of acquisitions and divestitures
contributed 4 percentage points of this 11 percentage-point growth
in revenue. -- Net unusual charges of $15.8 million, which include:
-- A net $12.8 million in gains, losses and non-recurring items,
which consist of: -- Restructuring charges of $13.0 million --
Losses on the sale of assets and operating units of $2.6 million --
A gain of $2.8 million on the sale of an unused Phoenix facility.
-- $2.2 million in legal, investment banking and other fees
associated with representation of the Company related to activities
by ValueAct Capital -- $0.8 million in expenses related to a
lawsuit resolved in the quarter. -- Income from operations of $18.8
million, which was reduced by the $15.8 million noted above,
compared to $34.4 million in the second quarter last year. --
Pre-tax earnings of $12.4 million, which was reduced by the $15.8
million noted above, compared to $29.8 million in the second
quarter a year ago. -- Diluted earnings per share of $.08, which
was reduced by the $.12 EPS noted above, compared to $.20 in the
second quarter last year. -- Operating cash flow of $44.8 million
and free cash flow of $20.9 million. The free cash flow of $20.9
million is a non-GAAP financial measure and a reconciliation to the
comparable GAAP measure, operating cash flow, is attached to this
press release. -- The acquisition of Insight America, a Broomfield,
Colo.-based company that provides data-driven solutions, analytic
tools and background screening services to help clients mitigate
risks, prevent identity theft and limit fraud. -- The purchase of
3.5 million shares of common stock through the Company's buy-back
program at a total cost of $69.1 million. -- New contracts that
will deliver $49 million in annual revenue and renewals that total
$17 million in annual revenue. The $49 million in new annual
revenue equals the highest new contract annual revenue total for
any quarter. -- Committed new deals in the pipeline that are
expected to generate $61 million in annual revenue. *T "Our profit
improvement plan helped us achieve $11 million in pre-tax cost
savings in the second quarter, and we will continue to realize
benefits from our operational initiatives, including ongoing
expense management and an intense focus on performance metrics,"
Company Operations Leader Lee Hodges said. "We expect those
initiatives to contribute more than $15 million in the third
quarter and in each subsequent quarter going forward." Morgan noted
that Acxiom recently completed new contracts with Washington Mutual
Inc. (formerly Providian), NDCHealth Corporation, MGM MIRAGE,
Yellow Book USA and Reliance Insurance. "The amount and nature of
the new contracts we signed in the quarter certainly give us reason
for optimism," Morgan said. "For example, the NDCHealth deal is
particularly significant, as it represents our third grid
computing-based data center re-engineering project." Outlook The
Company's expectations for fiscal 2006 and beyond are communicated
in the Financial Road Map, which is attached. The financial
projections stated today are based on the Company's current
expectations. These projections are forward looking, and actual
results may differ materially. These projections do not include the
potential impact of any mergers, acquisitions, divestitures or
other business combinations that may be completed in the future and
exclude the net unusual charges recorded in the quarter ended
September 30, 2005. About Acxiom Acxiom Corporation (Nasdaq: ACXM)
integrates data, services and technology to create and deliver
customer and information management solutions for many of the
largest, most respected companies in the world. The core components
of Acxiom's innovative solutions are Customer Data Integration
(CDI) technology, data, database services, IT outsourcing,
consulting and analytics, and privacy leadership. Founded in 1969,
Acxiom is headquartered in Little Rock, Arkansas, with locations
throughout the United States and Europe, and in Australia and
China. For more information, visit www.acxiom.com. This release and
today's conference call contain forward-looking statements that are
subject to certain risks and uncertainties that could cause actual
results to differ materially. Such statements may include but are
not necessarily limited to the following: that with the exception
of the impact of the net unusual charges recorded in the quarter
ended September 30, 2005, the projected revenue, operating margin,
return on assets and return on invested capital, operating cash
flow and free cash flow, borrowings, dividends and other metrics
referred to in the Financial Road Map attached to this release will
be within the estimated ranges; that the estimations of revenue,
earnings, cash flow, growth rates, restructuring charges and
expense reductions will be within the estimated ranges; that the
business pipeline and our anticipated cost structure will allow us
to continue to meet or exceed revenue, cash flow and other
projections. The following are important factors, among others,
that could cause actual results to differ materially from these
forward-looking statements: The possibility that we may incur
expenses related to unsolicited proposals or other efforts by
others to acquire or control the Company; certain contracts may not
be closed, or may not be closed within the anticipated time frames;
the possibility that certain contracts may not generate the
anticipated revenue or profitability; the possibility that negative
changes in economic or other conditions might lead to a reduction
in demand for our products and services; the possibility of an
economic slowdown or that economic conditions in general will not
be as expected; the possibility that significant customers may
experience extreme, severe economic difficulty; the possibility
that the integration of acquired businesses may not be as
successful as planned; 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
sales cycles may lengthen; the possibility that we may not be able
to attract and retain qualified technical and leadership
associates, or that we may lose key associates to other
organizations; the possibility that we won't be able to properly
motivate our sales force or other associates; the possibility that
we won't be able to achieve cost reductions and avoid unanticipated
costs; the possibility that we won't be able to continue to receive
credit upon satisfactory terms and conditions; the possibility that
competent, competitive products, technologies or services will be
introduced into the marketplace by other companies; the possibility
that we may be subjected to pricing pressure due to market
conditions and/or competitive products and services; the
possibility that there will be changes in consumer or business
information industries and markets; the possibility that changes in
accounting pronouncements may occur and may impact these
projections; the possibility that we won't be able to protect
proprietary information and technology or to obtain necessary
licenses on commercially reasonable terms; the possibility that we
may encounter difficulties when entering new markets or industries;
the possibility that there will be changes in the legislative,
accounting, regulatory and consumer environments affecting our
business, including but not limited to litigation, legislation,
regulations and customs relating to our ability to collect, manage,
aggregate and use data; the possibility that data suppliers might
withdraw data from us, leading to our inability to provide certain
products and services; the possibility that we may enter into
short-term contracts which would affect the predictability of our
revenues; the possibility that the amount of ad hoc, volume-based
and project work will not be as expected; the possibility that we
may experience a loss of data center capacity or interruption of
telecommunication links or power sources; the possibility that we
may experience failures or breaches of our network and data
security systems, leading to potential adverse publicity, negative
customer reaction, or liability to third parties; the possibility
that postal rates may increase, thereby leading to reduced volumes
of business; the possibility that our clients may cancel or modify
their agreements 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 experience processing errors which result in credits to
customers, re-performance of services or payment of damages to
customers; the possibility that the services of the United States
Postal Service, their global counterparts and other delivery
systems may be disrupted; and the possibility that we may be
affected by other competitive factors. With respect to the
Financial Road Map, all of the above factors apply, along with the
following which were assumptions made in creating the Financial
Road Map: that the U.S. and global economies will continue to
improve at a moderate pace; that global growth will continue to be
strong and that globalization trends will continue to grow at an
increasing pace; that Acxiom's computer and communications related
expenses will continue to fall as a percentage of revenue; that the
Customer Information Infrastructure (CII) grid-based environment
Acxiom has begun to implement will continue to be implemented
successfully over the next 3-4 years and that the new CII
infrastructure will continue to provide increasing operational
efficiencies; that the acquisitions of companies operating
primarily outside of the United States will be successfully
integrated and that significant efficiencies will be realized from
this integration; relating to operating cash flow and free cash
flow, that sufficient operating and capital lease arrangements will
continue to be available to the Company to provide for the
financing of most of its computer equipment and that software
suppliers will continue to provide financing arrangements for most
of the software purchases; relating to revolving credit line
balance, that free cash flow will meet expectations and that the
Company will use free cash flow to pay down bank debt, buy back
stock and fund dividends; relating to annual dividends, that the
Board of Directors will continue to approve quarterly dividends and
will vote to increase dividends over time; relating to diluted
shares, that the Company will meet its cash flow expectations and
that potential dilution created through the issuance of stock
options and warrants will be mitigated by continued stock
repurchases in accordance with the Company's stock repurchase
program. 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
culture, laws and regulations. Other factors are detailed from time
to time in our periodic reports and registration statements filed
with the United States Securities and Exchange Commission. We
believe 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.
We undertake no obligation to update the information contained in
this press release, including the Financial Road Map or any other
forward-looking statement. Acxiom is a registered trademark of
Acxiom Corporation. -0- *T ACXIOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Dollars in
thousands, except earnings per share) For the Three Months Ended
September 30, ------------------------- 2005 2004 -------------
----------- Revenue: Services 253,193 220,072 Data 77,330 79,037
------------- ----------- Total revenue 330,523 299,109 Operating
costs and expenses: Cost of revenue Services 193,500 168,950 Data
52,124 49,768 ------------- ----------- Total cost of revenue
245,624 218,718 Selling, general and administrative 53,285 46,020
Gains, losses and nonrecurring items, net 12,799 - -------------
----------- Total operating costs and expenses 311,708 264,738
------------- ----------- Income from operations 18,815 34,371
------------- ----------- Other income (expense): Interest expense
(7,416) (4,743) Other, net 1,050 205 ------------- -----------
Total other income (expense) (6,366) (4,538) -------------
----------- Earnings before income taxes 12,449 29,833 Income taxes
5,300 11,337 ------------- ----------- Net earnings 7,149 18,496
============= =========== Earnings per share: Basic 0.08 0.22
============= =========== Diluted 0.08 0.20 =============
=========== ACXIOM CORPORATION AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF OPERATIONS (Unaudited) (Dollars in thousands, except
earnings per share) For the Six Months Ended September 30,
------------------------- 2005 2004 ------------- -----------
Revenue: Services 491,692 427,919 Data 149,102 160,184
------------- ----------- Total revenue 640,794 588,103 Operating
costs and expenses: Cost of revenue Services 389,469 332,499 Data
101,009 101,587 ------------- ----------- Total cost of revenue
490,478 434,086 Selling, general and administrative 105,365 94,549
Gains, losses and nonrecurring items, net 11,162 (344)
------------- ----------- Total operating costs and expenses
607,005 528,291 ------------- ----------- Income from operations
33,789 59,812 ------------- ----------- Other income (expense):
Interest expense (12,578) (9,813) Other, net 1,941 614
------------- ----------- Total other income (expense) (10,637)
(9,199) ------------- ----------- Earnings before income taxes
23,152 50,613 Income taxes 9,364 19,233 ------------- -----------
Net earnings 13,788 31,380 ============= =========== Earnings per
share: Basic 0.15 0.36 ============= =========== Diluted 0.15 0.34
============= =========== ACXIOM CORPORATION AND SUBSIDIARIES
CALCULATION OF EARNINGS PER SHARE (Unaudited) (In thousands, except
earnings per share) For the Three Months Ended September 30,
--------------------------- 2005 2004 ------------- -------------
Basic earnings per share: Numerator - net earnings 7,149 18,496
Denominator - weighted-average shares outstanding 86,998 86,010
------------- ------------- Basic earnings per share 0.08 0.22
============= ============= Diluted earnings per share: Numerator:
Net earnings 7,149 18,496 Interest expense on convertible bonds
(net of tax benefit) - 1,017 ------------- ------------- 7,149
19,513 ------------- ------------- Denominator: Weighted-average
shares outstanding 86,998 86,010 Dilutive effect of common stock
options and warrants 2,599 3,464 Dilutive effect of convertible
debt - 9,589 ------------- ------------- 89,597 99,063
------------- ------------- Diluted earnings per share 0.08 0.20
============= ============= ACXIOM CORPORATION AND SUBSIDIARIES
CALCULATION OF EARNINGS PER SHARE (Unaudited) (In thousands, except
earnings per share) For the Six Months Ended September 30,
--------------------------- 2005 2004 ------------- -------------
Basic earnings per share: Numerator - net earnings 13,788 31,380
Denominator - weighted-average shares outstanding 89,021 86,047
------------- ------------- Basic earnings per share 0.15 0.36
============= ============= Diluted earnings per share: Numerator:
Net earnings 13,788 31,380 Interest expense on convertible bonds
(net of tax benefit) - 2,034 ------------- ------------- 13,788
33,414 ------------- ------------- Denominator: Weighted-average
shares outstanding 89,021 86,047 Dilutive effect of common stock
options and warrants 2,676 3,709 Dilutive effect of convertible
debt - 9,589 ------------- ------------- 91,697 99,345
------------- ------------- Diluted earnings per share 0.15 0.34
============= ============= ACXIOM CORPORATION AND SUBSIDIARIES
REVENUES BY SEGMENT (Unaudited) (Dollars in thousands) For the
Three Months Ended September 30, --------------------------- 2005
2004 ------------ -------------- US Services & Data 286,326
251,216 International Services & Data 44,197 47,893
------------ -------------- Total Revenue 330,523 299,109
============ ============== US Supplemental Information: Services
& Data Excluding IT Mgmt 200,566 182,558 IT Management Services
85,760 68,658 ------------ -------------- 286,326 251,216
============ ============== International Supplemental Information:
Services & Data Excluding IT Mgmt 44,197 47,893 IT Management
Services - - ------------ -------------- 44,197 47,893 ============
============== ACXIOM CORPORATION AND SUBSIDIARIES REVENUES BY
SEGMENT (Unaudited) (Dollars in thousands) For the Six Months Ended
September 30, --------------------------- 2005 2004 ------------
-------------- US Services & Data 551,760 486,768 International
Services & Data 89,034 101,335 ------------ --------------
Total Revenue 640,794 588,103 ============ ============== US
Supplemental Information: Services & Data Excluding IT Mgmt
379,198 354,841 IT Management Services 172,562 131,927 ------------
-------------- 551,760 486,768 ============ ==============
International Supplemental Information: Services & Data
Excluding IT Mgmt 89,034 101,335 IT Management Services - -
------------ -------------- 89,034 101,335 ============
============== ACXIOM CORPORATION AND SUBSIDIARIES CONDENSED
CONSOLIDATED BALANCE SHEETS (Unaudited) (Dollars in thousands)
September 30, March 31, 2005 2005 ------------- ------------ Assets
-------- Current assets: Cash and cash equivalents $5,962 $4,185
Trade accounts receivable, net 258,004 250,653 Deferred income
taxes 31,766 31,415 Refundable income taxes - 1,345 Other current
assets 42,048 46,034 ------------- ------------ Total current
assets 337,780 333,632 ------------- ------------ Property and
equipment 655,255 581,918 Less - accumulated depreciation and
amortization 304,142 258,532 ------------- ------------ Property
and equipment, net 351,113 323,386 ------------- ------------
Software, net of accumulated amortization 69,927 57,135 Goodwill
474,360 354,182 Purchased software licenses, net of accumulated
amortization 161,321 157,999 Unbilled and notes receivable,
excluding current portions 21,322 20,410 Deferred costs, net 99,035
88,851 Data acquisition costs 42,861 48,915 Other assets, net
25,431 15,369 ------------- ------------ $1,583,150 $1,399,879
============= ============ Liabilities and Stockholders' Equity
-------------------------------------- Current liabilities: Current
installments of long-term obligations 87,623 83,005 Trade accounts
payable 54,920 63,295 Accrued payroll and related expenses 24,979
27,435 Other accrued expenses 89,905 74,635 Deferred revenue
112,936 115,892 Income Taxes 1,025 - ------------- ------------
Total current liabilities 371,388 364,262 -------------
------------ Long-term obligations: Long-term debt and capital
leases, net of current installments 477,461 104,210 Software and
data licenses, net of current installments 31,186 37,494
------------- ------------ Total long-term obligations 508,647
141,704 ------------- ------------ Deferred income taxes 87,147
79,079 Commitments and contingencies Stockholders' equity: Common
stock 10,554 10,440 Additional paid-in capital 617,752 588,156
Retained earnings 368,535 363,556 Accumulated other comprehensive
loss 4,747 12,616 Treasury stock, at cost (385,620) (159,934)
------------- ------------ Total stockholders' equity 615,968
814,834 ------------- ------------ $1,583,150 $1,399,879
============= ============ ACXIOM CORPORATION AND SUBSIDIARIES
RECONCILIATION OF FREE CASH FLOW TO OPERATING CASH FLOW (Unaudited)
(Dollars in thousands) Qtr ended Qtr ended Qtr ended Qtr ended Yr
ended 6/30/2002 9/30/2002 12/31/2002 3/31/2003 3/31/2003 Net cash
provided by operating activities 60,243 53,446 76,992 63,112
253,793 Proceeds received from disposition of assets 45 155 - 93
293 Capitalized software (8,652) (8,958) (8,726) (8,237) (34,573)
Capital expenditures (1,916) (3,000) (5,893) (2,403) (13,212)
Deferral of costs (3,240) (4,108) (3,796) (3,883) (15,027) Proceeds
from sale and leaseback transaction - 7,729 - - 7,729
--------------------------------------------------- Free cash flow
46,480 45,264 58,577 48,682 199,003
=================================================== Qtr ended Qtr
ended Qtr ended Qtr ended Yr ended 6/30/2003 9/30/2003 12/31/2003
3/31/2004 3/31/2004 Net cash provided by operating activities
48,125 49,909 79,282 82,567 259,883 Proceeds received from
disposition of assets 506 192 39 2,046 2,783 Capitalized software
(6,335) (7,296) (6,510) (7,703) (27,844) Capital expenditures
(1,588) (3,036) (7,637) (9,917) (22,178) Deferral of costs (6,026)
(4,006) (5,312) (9,537) (24,881)
--------------------------------------------------- Free cash flow
34,682 35,763 59,862 57,456 187,763
=================================================== Qtr ended Qtr
ended Qtr ended Qtr ended Yr ended 6/30/2004 9/30/2004 12/31/2004
3/31/2005 3/31/2005 Net cash provided by operating activities
34,714 61,742 82,805 67,753 247,014 Capitalized software (4,107)
(4,721) (5,706) (5,760) (20,294) Capital expenditures (1,823)
(4,813) (3,132) (4,562) (14,330) Deferral of costs (9,610) (11,113)
(15,502) (17,203) (53,428)
--------------------------------------------------- Free cash flow
19,174 41,095 58,465 40,228 158,962
=================================================== Qtr ended Qtr
ended 6/30/2005 9/30/2005 Net cash provided by operating activities
61,476 44,785 Proceeds received from disposition of assets - 3,613
Capitalized software (5,673) (5,809) Capital expenditures (2,929)
(3,025) Deferral of costs (16,192) (18,703) --------------------
Free cash flow 36,682 20,861 ==================== ACXIOM
CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS (Unaudited) (Dollars in thousands) For the Three Months
Ended September 30, ----------------------------- 2005 2004
-------------- -------------- Cash flows from operating activities:
Net earnings 7,149 18,496 Non-cash operating activities:
Depreciation and amortization 57,104 45,102 Loss (gain) on disposal
or impairment of assets, net (970) - Deferred income taxes 4,380
10,699 Non-cash stock compensation expense 324 - Changes in
operating assets and liabilities: Accounts receivable (22,583)
(7,488) Other assets 2,785 (7,434) Accounts payable and other
liabilities (3,404) 2,367 -------------- -------------- Net cash
provided by operating activities 44,785 61,742 --------------
-------------- Cash flows from investing activities: Disposition of
operations 1,529 - Sale of assets 3,613 - Capitalized software
(5,809) (4,721) Capital expenditures (3,025) (4,813) Deferral of
costs (18,703) (11,113) Payments received from investments 41 219
Net cash paid in acquisitions (34,807) (11,181) --------------
-------------- Net cash used by investing activities (57,161)
(31,609) -------------- -------------- Cash flows from financing
activities: Proceeds from debt 109,583 59,203 Payments of debt
(36,647) (75,049) Dividends paid (4,377) (3,446) Sale of common
stock 8,024 4,354 Acquisition of treasury stock (69,081) (16,397)
-------------- -------------- Net cash used by financing activities
7,502 (31,335) -------------- -------------- Effect of exchange
rate changes on cash (53) 128 -------------- -------------- Net
decrease in cash and cash equivalents (4,927) (1,074) Cash and cash
equivalents at beginning of period 10,889 11,214 --------------
-------------- Cash and cash equivalents at end of period 5,962
10,140 ============== ============== Supplemental cash flow
information: Cash paid (received) during the period for: Interest
6,076 6,554 Income taxes 282 8 Payments on capital leases and
installment payment arrangements 15,967 13,374 Payments on software
and data license liabilities 5,328 3,151 Noncash investing and
financing activities: Enterprise software licenses acquired under
software obligation 6,219 3,282 Acquisition of property and
equipment under capital lease and installment payment arrangements
29,115 18,572 Construction of assets under construction loan 3,144
6,323 ============== ============== ACXIOM CORPORATION AND
SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (Dollars in thousands) For the Six Months Ended
September 30, ------------------------- 2005 2004 ------------
------------ Cash flows from operating activities: Net earnings
13,788 31,380 Non-cash operating activities: Depreciation and
amortization 112,638 89,099 Loss (gain) on disposal or impairment
of assets, net (927) - Deferred income taxes 8,015 19,548 Non-cash
stock compensation expense 622 - Changes in operating assets and
liabilities: Accounts receivable (5,286) (26,149) Other assets
(15,160) (8,446) Accounts payable and other liabilities (7,429)
(8,976) ------------ ------------ Net cash provided by operating
activities 106,261 96,456 ------------ ------------ Cash flows from
investing activities: Disposition of operations 1,529 - Sale of
assets 3,613 - Capitalized software (11,482) (8,828) Capital
expenditures (5,954) (6,636) Deferral of costs (34,895) (20,723)
Payments received from investments 762 503 Net cash paid in
acquisitions (141,526) (16,741) ------------ ------------ Net cash
used by investing activities (187,953) (52,425) ------------
------------ Cash flows from financing activities: Proceeds from
debt 391,289 98,129 Payments of debt (90,777) (135,609) Dividends
paid (8,809) (6,895) Sale of common stock 21,551 23,671 Acquisition
of treasury stock (229,435) (27,368) ------------ ------------ Net
cash used by financing activities 83,819 (48,072) ------------
------------ Effect of exchange rate changes on cash (350) (174)
------------ ------------ Net decrease in cash and cash equivalents
1,777 (4,215) Cash and cash equivalents at beginning of period
4,185 14,355 ------------ ------------ Cash and cash equivalents at
end of period 5,962 10,140 ============ ============ Supplemental
cash flow information: Cash paid (received) during the period for:
Interest 10,473 9,888 Income taxes 472 108 Payments on capital
leases and installment payment arrangements 35,896 26,633 Payments
on software and data license liabilities 16,266 14,847 Noncash
investing and financing activities: Enterprise software licenses
acquired under software obligation 8,380 5,967 Acquisition of
property and equipment under capital lease and installment payment
arrangements 55,573 39,070 Construction of assets under
construction loan 6,798 13,111 ============ ============ ACXIOM
CORPORATION Financial Road Map(1) --------------------- (as of
September 30, 2005) ---------- ---------- ---------- ---------
---------- Long-Term Actual Actual Actual Target Goals Years Ending
Fiscal Q2 Fiscal YTD Fiscal Fiscal Fiscal March 31, 2005 2006 2006
2006 2009 ---------- ---------- ---------- --------- ----------
U.S. Revenue 13% to 7% to 10% Growth 9.0% 14.0% 13.4% 15% (CAGR)
U.S. Revenue $1,011 $286 $552 $1,140 to million million million
$1,160 mil - International -10% to 5% to 8% Revenue Growth 152.9%
-7.7% -12.1% -20% (CAGR) International $213 $44 $89 $170 to Revenue
million million million $190 mil - U.S. Operating 11.5% to 15% to
18% Margin 11.3% 9.3% 7.8% 12.5% Adjusted U.S. Operating Margin
12.4%(3) 9.4%(3) International 4.5% to 12% to 15% Operating Margin
3.9% -17.4% -10.3% 6.5% Adjusted International Operating Margin
-2.3%(3) -2.8%(3) Return on Assets (2) 9.2% 6.6% 6.6% 9% to 10% 10%
to 14% Return on Invested Capital 11% to 13% to 18% (2) 11.0%
9.4%(3) 9.4%(3) 12% Operating Cash $247 $45 $106 $250 to $270 to
Flow million million million $270 mil $300 mil $159 $21 $58 $160 to
$170 to Free Cash Flow million million million $180 mil $200 mil
Revolving Credit $11 $367 $367 $200 to less than Line Balance
million million million $375 mil $300 mil Dividends Per $0.24 to
Share $0.17 $0.05 $0.05 $0.20 $0.28 ----------------- (1)
Assumptions and definitions are defined on the following schedule:
"Financial Road Map assumptions and definitions" (2) ROA and ROIC
are calculated on a trailing 4 quarters basis. (3) Results exclude
unusual charges of $9.1 million for U.S. and $6.7 million for
International in the quarter ended September 30, 2005. These
charges are excluded when calculating performance compared to the
Road Map since they were not considered in setting the Road Map
target. All other time periods are as reported for GAAP. ACXIOM
CORPORATION Financial Road Map Assumptions and Definitions
------------------------------------------------ Assumptions
------------ 1. The effective tax rate is projected to be
approximately 38% for future years. 2. Interest rates are assumed
to increase slightly over the current levels. 3. Excluding acquired
NOLs, the Company expects to utilize all of its federal tax loss
carry forwards during fiscal 2006. Excluding acquired credits, the
Company expects to utilize all of its federal credits and begin
paying regular tax in fiscal 2007. The Company expects to gradually
begin paying state taxes as state NOLs are utilized. 4. The Company
will pay incentives under its bonus plan of approximately $5
million for fiscal 2006 and $15 to $25 million for each of the
years beginning in fiscal 2007 based on achievement of the
Company's business plan. 5. The Company will maintain a relatively
constant mix of business for each of its three business segments.
6. Foreign exchange rates will remain at approximately the current
levels. 7. Stock repurchases will be in amounts that yield the
highest shareholder return considering all other uses for the
available cash. 8. Diluted outstanding shares will increase
slightly to reflect the impact of in-the-money options as the stock
price increases. 9. Long-term goals are based on the Company's
current assessment of opportunities and are subject to change.
There are risks associated with obtaining these goals which are
explained under forward looking statements in the press release
accompanying this Financial Road Map. Acxiom disclaims any
obligation to update the information contained in this Financial
Road Map. Definitions ------------ 1. Revenue Growth is defined as
the percentage growth compared to the previous corresponding fiscal
year or comparable period. 2. Operating Margin is defined as the
income from operations as a percentage of revenue. 3. Return on
Assets (ROA) is defined as income from operations divided by
average total assets for the trailing four quarters. 4. Return on
Invested Capital (ROIC) is defined as income from operations
adjusted for the implied interest expense included in operating
leases divided by the trailing four quarters' average invested
capital. The implied interest adjustment for operating leases is
calculated by multiplying the average quarterly balances of the
present value of operating leases ((beginning balance + ending
balance)/2) x an 8% implied interest rate on the leases. Average
invested capital is defined as the trailing four-quarter average of
the ending quarterly balances for total assets less cash, less
non-interest bearing liabilities, plus the present value of
operating leases. 5. Operating Cash Flow is as shown on the
Company's cash flow statement. 6. Free Cash Flow is defined as cash
flow from operating activities less cash flow from investing
activities excluding net cash paid or received for acquisitions and
divestitures, joint ventures and investments. 7. Revolving Credit
Line Balance is defined as actual funds borrowed under the
Company's revolving line of credit facility at the end of the
period. 8. Dividends Per Share is defined as the sum of the
dividends for that period. ACXIOM CORPORATION Reconciliation of
Non-GAAP Measurements
----------------------------------------------------------------------
(Dollars in thousands) Actual Actual Years Ending March 31, Q2 YTD
Actual Fiscal Fiscal Fiscal 2005 2006 2006 ----------- --------
-------- U.S. Operating Margin ---------------------- U.S. Revenue
1,010,513 286,326 551,760 U.S. Operating Income 113,992 26,498
42,939 U.S. Operating Income Margin 11.3% 9.3% 7.8% Gains, losses
and nonrecurring items, net 0 6,147 6,147 ValueAct Defense 0 2,216
2,216 Lawsuit Expenses 0 761 761 ---------- -------- --------
Adjusted U.S. Operating Income (6) 113,992 35,622 52,063 Adjusted
U.S. Operating Income Margin (6) 11.3% 12.4% 9.4% ==========
======== ======== International Operating Margin
-------------------------------- International Revenue 212,529
44,197 89,034 International Operating Income 8,200 (7,684) (9,151)
International Operating Income Margin 3.9% -17.4% -10.3% Gains,
losses and nonrecurring items, net 0 6,652 6,652 ----------
-------- -------- Adjusted International Operating Income (6) 8,200
(1,032) (2,499) Adjusted International Operating Income Margin (6)
3.9% -2.3% -2.8% ========== ======== ======== Free Cash Flow
---------------- Net cash provided by operating activities 247,014
44,785 106,261 Proceeds received from disposition of assets 0 3,613
3,613 Capitalized software (20,294) (5,809) (11,482) Capital
expenditures (14,330) (3,025) (5,954) Deferral of costs (53,428)
(18,703) (34,895) ---------- -------- -------- Free cash flow
158,962 20,861 57,543 ========== ======== ======== Target Long-Term
Goals Years Ending March 31, Fiscal 2006 Fiscal 2009
---------------------------------------- Free Cash Flow
--------------- Net cash provided by operating activities 250,000
270,000 270,000 300,000 Proceeds received from disposition of
assets 0 0 0 0 Capitalized software (20,000) (20,000) (25,000)
(25,000) Capital expenditures (15,000) (15,000) (20,000) (20,000)
Deferral of costs (55,000) (55,000) (55,000) (55,000) --------
--------- -------- -------- Free cash flow 160,000 to 180,000
170,000 to 200,000 ======== ========= ======== ======== Free cash
flow as defined by the Company may not be comparable to similarly
titled measures reported by other companies. Management of the
Company has included free cash flow in this Financial Road Map
because although free cash flow does not represent the amount of
money available for the Company's discretionary spending since
certain obligations of the Company must be funded out of free cash
flow, management believes that it provides investors with a useful
alternative measure of liquidity by allowing an assessment of the
amount of cash available for general corporate and strategic
purposes, including debt payments, after funding operating
activities and capital expenditures, capitalized software expenses
and deferred costs. The above table reconciles free cash flow to
cash provided by operating activities, the nearest comparable GAAP
measure. Return on Assets (ROA) and Actual Actual Return on
Invested Fiscal 2005 Q2 Fiscal 2006 Capital (ROIC)(5) ROA ROIC ROA
ROIC ---------- ---------- ---------- ---------- Numerator: Income
from operations 122,192 122,192 96,169 96,169 Unusual Charges, Net
(6) 0 15,776 Add implied interest on operating leases (1) 13,903
12,513 ---------- ---------- ---------- ---------- 122,192 136,095
96,169 124,457 ---------- ---------- ---------- ----------
Denominator: Average total assets (2) 1,321,122 1,321,122 1,463,339
1,463,339 Less average cash (3) (11,858) (10,733) Less average non-
interest bearing current liabilities (4) (246,280) (276,286) Plus
average present value of operating leases (1) 168,734 151,919
------------------------------------- ---------- ----------
---------- 1,321,122 1,231,717 1,463,339 1,328,239 ----------
---------- ---------- ---------- Return on invested capital 9.2%
11.0% 6.6% 9.4% ========== ========== ========== ========== Actual
Return on Assets (ROA) and YTD Fiscal 2006 Return on Invested
Capital (ROIC)(5) ROA ROIC ------------------------------------
---------- ---------- Numerator: Income from operations 96,169
96,169 Unusual Charges, Net (6) 0 15,776 Add implied interest on
operating leases (1) 12,513 ---------- ---------- 96,169 124,457
---------- ---------- Denominator: Average total assets (2)
1,463,339 1,463,339 Less average cash (3) (10,733) Less average
non-interest bearing current liabilities (4) (276,286) Plus average
present value of operating leases (1) 151,919 ---------- ----------
1,463,339 1,328,239 ---------- ---------- Return on invested
capital 6.6% 9.4% ========== ========== Return on Assets (ROA)
Target and Return on Invested Fiscal 2006 Capital (ROIC)(5) ROA
ROIC ----------------------- ----------------------- Numerator:
Income from operations 141,000 160,000 141,000 160,000 Unusual
Charges, Net (6) Add implied interest on operating leases (1)
14,200 14,200 ---------- ---------- ---------- ---------- 141,000
160,000 155,200 174,200 ---------- ---------- ---------- ----------
Denominator: Average total assets (2) 1,542,000 1,552,000 1,542,000
1,552,000 Less average cash (3) (6,300) (12,700) Less average non-
interest bearing current liabilities (4) (280,000) (280,200) Plus
average present value of operating leases (1) 180,000 179,500
---------- ---------- ---------- ---------- 1,542,000 1,552,000
1,435,700 1,438,600 ---------- ---------- ---------- ----------
Return on invested capital 9% to 10% 11% to 12% ==========
========== ========== ========== Return on Assets (ROA) and Return
on Long-Term Goals Invested Capital Fiscal 2009 (ROIC)(5) ROA ROIC
------------------------ ------------------------ Numerator: Income
from operations 191,000 272,000 191,000 272,000 Unusual Charges,
Net (6) Add implied interest on operating leases (1) 19,000 19,000
---------- ---------- ---------- ---------- 191,000 272,000 210,000
291,000 ---------- ---------- ---------- ---------- Denominator:
Average total assets (2) 1,840,000 1,938,000 1,840,000 1,938,000
Less average cash (3) (214,800) (285,100) Less average non-
interest bearing current liabilities (4) (290,000) (291,500) Plus
average present value of operating leases (1) 237,000 237,000
---------- ---------- ---------- ---------- 1,840,000 1,938,000
1,572,200 1,598,400 ---------- ---------- ---------- ----------
Return on invested capital 10% to 14% 13% to 18% ==========
========== ========== ========== Notes ------ (1) Average present
value of operating leases is the average for the trailing 4 quarter
ends of the present value of future payments on operating leases,
discounted at 8% which is the assumed implicit interest rate
included in the leases. The implied interest added to the numerator
is the 8% assumed interest charge on the average quarterly balance
((beginning + Ending) / 2) of the present value of the leases. (2)
Average total assets is the average of the GAAP amount for the
trailing 4 quarter ends. (3) Average cash is the average of the
GAAP amount for the trailing 4 quarter ends. (4) Average
non-interest bearing current liabilities is the average for the
trailing 4 quarter ends of all current liabilities excluding the
current portion of long-term debt. (5) ROA and ROIC figures are
calculated on a trailing 4 quarters basis. (6) Results exclude
unusual charges of $9.1 million for U.S. and $6.7 million for
International in the quarter ended September 30, 2005. These
charges are excluded when calculating performance compared to the
Road Map since they were not considered in setting the Road Map
target. All other time periods are as reported for GAAP. Return on
Invested Capital (ROIC) as defined by the Company, may not be
comparable to similarly titled measures reported by other
companies. Management of the Company has included ROIC in this
Financial Road Map because it measures the capital efficiency of
our business. ROIC does not consider whether the business is
financed with debt or equity; rather ROIC calculates a return on
all capital invested in the business. The above table reconciles
ROIC to a ROA calculation using GAAP numbers. The Company uses ROIC
in a number of ways, including pricing analysis, capital
expenditure evaluation, and merger and acquisition valuation.
ACXIOM CORPORATION AND SUBSIDIARIES SUMMARIZED SUPPLEMENTAL CASH
FLOW INFORMATION (Unaudited) (Dollars in thousands) Quarters ended
--------------------------------------- Last 12 12/31/04 03/31/05
06/30/05 09/30/05 Months ---------------------------------------
---------- Free cash flow 58,465 40,228 36,682 20,861 156,236
Payments received from investments 1,795 235 721 41 2,792 Change in
revolver (22,440) 10,921 259,800 96,665 344,946 Other debt proceeds
0 4,175 0 0 4,175 Sale of common stock 14,537 5,776 13,527 8,024
41,864 Acquisition of treasury stock (2,840) (33,551) (160,354)
(69,081) (265,826) Dividends paid (3,464) (4,290) (4,432) (4,377)
(16,563) Debt payments (excluding payments on line of credit)
(28,072) (22,316) (32,224) (23,729) (106,341) Proceeds from the
disposition of operations - - - 1,529 1,529 Net cash paid in
acquisitions (6,847) (18,612) (106,719) (34,807) (166,985) Effect
of exchange rate changes on cash 620 (275) (297) (53) (5)
--------------------------------------- ---------- Net change in
cash 11,754 (17,709) 6,704 (4,927) (4,178)
======================================= ========== *T
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