Back to GetFilings.com
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from __________ to __________.
Commission file number 0-13163
ACXIOM CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 71-0581897
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
P.O. BOX 2000, 301 INDUSTRIAL BOULEVARD,
CONWAY, ARKANSAS 72033-2000
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code)(501) 336-1000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.10 Par Value
(Title of Class)
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. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant, based upon the closing sale price of the registrant's Common Stock,
$.10 par value per share, as of June 10, 1996 as reported on the Nasdaq National
Market, was approximately $455,455,033. (For purposes of determination of the
above stated amount only, all directors, officers and 10% or more shareholders
of the registrant are presumed to be affiliates.)
The number of shares of Common Stock, $.10 par value per share, outstanding as
of June 10, 1996 was 25,414,443.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Annual Report to Shareholders for the
fiscal year ended March 31, 1996 ("Annual Report") are incorporated by reference
into Parts I and II.
Portions of the Proxy Statement for the Annual Meeting of Shareholders
to be held July 24, 1996 ("1996 Proxy Statement") are incorporated by reference
into Part III.
FORWARD-LOOKING STATEMENTS OR INFORMATION
Certain statements identified as "forward-looking statements" in this
Form 10-K are not based on historical facts, but are, instead, based upon a
number of assumptions concerning future conditions that may ultimately prove to
be inaccurate. Actual events and results may materially differ from anticipated
results described in such statements. The Company's ability to achieve such
results is subject to certain risks and uncertainties, including, but not
limited to, adverse business conditions in the industries served by the Company
and the general economy, competition, new laws and regulations impacting the
services the Company provides, and other risk factors affecting the Company's
business beyond the Company's control.
PART I
Item 1. Business
General
The Company's traditional business is the provision of data processing
and related computer-based services to direct marketing organizations and to the
marketing departments of large corporations in the United States and the United
Kingdom. The Company is also in the preliminary planning stages of investigating
the possibility of providing similar services and software products to
organizations in other countries, including the Pacific Rim.
Since its inception in 1969, the Company has evolved into what
management believes, based upon its knowledge of the industry, is a leading
provider of computer-based marketing information services. The Company offers a
broad range of services and data to direct marketers and to other businesses
which utilize direct marketing techniques such as direct mail advertising,
database marketing and mining of data warehouses. The Company assists its
customers with the marketing process, from project design, to list brokering and
management, to list cleaning, list enhancement and list production, to database
creation and management, to fulfillment and consumer response analysis.
The Company also offers outsourcing/facilities management and
information management services whereby the Company manages the data processing
and information systems functions for its customers. Such customers and
prospects include traditional direct marketing companies as well as companies
which manage information about households and businesses. Management anticipates
that delivery of data and information products will continue to expand during
the foreseeable future, and that such services will increasingly generate a
greater percentage of the Company's revenue. See "The Company's Products and
Services," below.
The Company was incorporated in Delaware in 1983 and succeeded by
merger to the business of Conway Communications Exchange, Inc., an Arkansas
corporation incorporated in 1969 as Demographics, Inc., which thereafter changed
its name to Conway Communications Exchange, Inc. Effective upon the 1983 merger,
the Company operated as CCX Network, Inc. until 1988, when the name Acxiom
Corporation was adopted. The Company's headquarters are located in Conway,
Arkansas.
Two acquisitions were completed by the Company during the past fiscal
year. On July 14, 1995, the Company purchased the outstanding stock of Generator
Datamarketing Limited ("Generator"). Generator, located in Hertfordshire,
England, provides data and database marketing software and processing services
to its customers.
These services are being combined with those of Acxiom U.K. Limited, the
Company's U.K. subsidiary. The Company believes that the acquisition will
benefit both operations by combining the Company's back-end volume processing
capability and customer service strength with Generator's front-end decision
support and sales capabilities and data. On August 25, 1995, the Company
acquired all of the outstanding capital stock of each of DataQuick(TM)
Information Systems and DQ Investment Corporation (collectively, "DataQuick").
With headquarters in San Diego, California, DataQuick provides real property
information to support a broad range of applications including marketing
appraisal, real estate, banking, mortgage and insurance. This information is
distributed on-line and via CD-ROM, list services, and microfiche. The Company
believes that DataQuick's real estate data, combined with the data which the
Company already offers through InfoBase(TM) (see below) provides opportunities
in a variety of applications for the Company's customers, particularly in the
insurance and finance sections. See "The Company's Products and Services,"
below.
Most recently, the Company completed two additional acquisitions, which
became effective in April 1996. The Company purchased substantially all of the
assets and assumed certain liabilities of Direct Media(TM)/DMI, Inc. ("DMI")
effective as of April 1, 1996. DMI, the largest list management company in the
United States and one of the largest list brokers as well, provides list
brokerage, management and consulting services to business-to-business and
consumer list owners and mailers. On April 9, 1996, the Company acquired all of
the outstanding capital stock of Pro CD(TM), Inc. ("Pro CD"), a publisher of
reference software on CD-ROM. Pro CD is a market-leading provider of telephone
and mapping data, including the Select Phone(TM) CD-ROM product, to the consumer
and small office/home office markets. See "Recent Developments" and "The
Company's Products and Services," below.
The Company has traditionally relied heavily upon the use of mainframe
hardware that is one generation old for batch processing, but more current
technology for on-line processing. While it expects to continue to do so in the
future, it is nevertheless constantly seeking more cost-effective ways to
deliver its services. During fiscal year 1995, the Company introduced several
new strategies into its processing environment: (1) several of the Company's
core application systems products were re-engineered to run on a parallel
processing architecture, thereby allowing the Company to significantly reduce
its processing cycle time and improve the scalability of its legacy list
processing application (the Company plans to re-engineer much of its legacy
software to run on parallel servers); (2) dedicated stand-alone mainframes have
been utilized as attached processors to the Company's computing enterprise,
resulting in the ability to off-load high volume list processing work onto cost
efficient data processing platforms; and (3) the Company has installed a Local
Area Network ("LAN") system and implemented extensive use of personal computers
("PCs") as front-end client workstations. The latter improvement provides a
graphical user interface ("GUI") front-end use capability to all internal and
customer applications, as well as the ability to institute a client/server
architecture within the Company's existing computing enterprise.
The Company's Products and Services
Mailing List Processing Services. The services described below have
historically formed the core of the Company's business and will continue to be
important to its operations:
The Company offers data processing and related services to the direct
marketing industry and to a variety of other businesses. With respect to the
Company's traditional business, management believes, based upon its knowledge of
the industry, that the Company is one of the leading suppliers of information
services to the direct marketing industries in the United States and the United
Kingdom, offering companies that use direct marketing access to extensive
customer lists and databases of information, as well as providing a wide range
of services that permit customers to precisely tailor their mailing lists in
accordance with specifically targeted marketing plans.
The Company provides computer-based targeted marketing support for
direct marketers, which support consists of planning and project design, list
cleaning, list enhancement, list order fulfillment, database services and
response analysis. Rather than focusing solely upon direct marketing programs
designed to obtain new business prospects for its customers, the Company has
begun to build marketing databases which enable its customers to focus upon
their existing clientele. Such databases allow a marketer to analyze its
customers' buying habits, and to narrowly target advertising campaigns to those
customers who are most likely to respond. In addition, the Company
offers integrated data processing software systems and enhancement services
which provide its customers with rapid access to marketing information housed at
the Company's Conway, Arkansas and Sunderland, England locations.
An integral aspect of the Company's traditional business is offering
its customers access to extensive customer lists and databases of information.
The Company acts as a link between those who own or manage lists and those who
buy or use lists for direct marketing purposes. The list owners could remove the
lists from the Company's possession, and if a substantial number of lists were
removed, a material adverse impact upon the Company's operations could result.
However, management believes that any such actions are unlikely in that the
value of the lists are enhanced through manipulation by the Company's software
and through combination with other lists. In addition, few list owners utilizing
the Company's services in the past have removed their lists. Moreover,
management believes that the Company's recent acquisition of DMI will further
solidify the Company's relationship with the list owners. See "Recent
Developments," below. Consequently, based upon its knowledge of the operations
of its competitors and its customers, management believes that the Company has
been entrusted with the largest aggregation of names, addresses and related data
available to the direct marketing industry and to other businesses, in that it
maintains and updates over 550 databases owned by others, comprising
approximately 3 billion name and address records, all of which records are
available to authorized customers.
Database, Data Warehousing and Decision Support Services. Direct
marketing programs require the analysis and segmentation of large amounts of
data on past customers and known marketplace prospects to identify desired
purchasing characteristics. Using advanced technology, the Company can integrate
the diversified databases of its customers into a single database. Then external
InfoBase data, consisting of demographic, behavioral and comparative customer
information, is overlayed to created a unified customer database. The customer's
information then becomes accessible and actionable enterprise-wide through the
Company's proprietary desktop tools and services. Typically, decision support
involves the ability to extract user-defined segments from an aggregation of
data ("data warehouse") via a query capability and then to profile and/or report
on a data segment, as well as the ability to perform more detailed analysis.
From the resulting information, specific targeted marketing strategies and
personalized communications can be generated. Through a national data
communications network in the United States, the Company provides access to data
warehouse information to drive decision support strategies for direct marketing
organizations. The Company also provides several decision support software tools
and services which are designed to provide customers with access to their data
warehouse resources and to further allow them to design and execute their
strategic marketing initiatives. The Company expanded its architecture during
the past fiscal year to include the decision support software systems
environment. In this area, the Company offers custom systems integration
services that may combine the Company's software with third party software
products to provide a customized decision support solution for a customer or an
industry.
The Company's primary vehicle for rapid delivery of these services is
its data communications network ("Network") through which direct marketing
customers receive authorized access to lists and databases housed at the
Company's Conway, Arkansas location. Customers are connected to the Network
through either Company-owned terminal devices furnished to the customer or
through customer-owned equipment. The Network is composed of dedicated, leased
data communication lines which link approximately 2,100 customer work stations
and printers at 170 U.S. sites, computer-to-computer links to customers and
communication to remote data centers located in the U.S. and U.K. connected to
the Network's central computer in Conway. Management believes that the Company
has one of the largest capacities for database management, mailing list
processing and networking in the industry. Through the Network, lists may be
interrogated and regrouped with marketing information selected by the customer,
including geographic, demographic, psychographic and previous consumer response
data, so as to create the desired universe of names. The customer can then
create, select, merge and enhance the lists available to it for even more
precise market segmentation, thus enabling each mailing program to be tailored
for a carefully targeted sales audience. Upon a customer's request, mailing
lists and labels of the composed universe of names can then be produced by the
Company for the customer's use.
To accommodate a balanced distribution of processes among the
client/server technology, decision support systems and mainframes, the Company
is in the process of implementing an industry standard network environment where
these processes can easily interface across the disparate platforms and even
into the Company's customers' environments. This network environment is called
TCP/IP (Transmission Control Protocol/Internet Protocol).
TCP/IP is a common protocol used in most private networks today, including those
of the Company's customers. The Company will use the TCP/IP protocol to deliver
its products, such as Acxiom MarketGuide(TM), as well as to perform internal
processing within the Company. The Company is writing a Communications
Application Program Interface ("API") in order to allow the Company's current
applications to interface with the TCP/IP protocol. When complete, the API will
substantially replace the Company's existing object request broker ("ORB")
technology. With the TCP/IP protocol, the Company can easily tie its business
processes (mainframe and server based) to its products in its customers'
environments as well as its local environments.
Based upon the Generator acquisition and a joint venture agreement with
the Boston-based consulting firm of Grant & Partners Limited Partnership ("Grant
& Partners"), the Company is now positioned to offer several front-end decision
support software products for its current customer base, as well the small
business market. The acquisition of Generator provides the Company with the
opportunity to market Generator's Rapidus(TM) decision support software product
in the United States. Rapidus allows users with even minimal training to extract
information from large databases via desktop computers. In addition,
Acxiom/Exchange Marketing Services ("AEMS"), a joint venture between the Company
and Grant & Partners which was finalized in October 1995, has begun marketing of
additional decision support software products. The Company further expanded its
decision support services during the past fiscal year to include strategic
alliances with a number of third party hardware and software vendors. Formal
business alliances with Oracle(TM), Redbrick(TM) and Arbor Essbase(TM) are
designed to bring significant additional decision support software systems
capability to the Company's customers.
Outsourcing/Facilities Management Services. For the past seven years,
the Company has provided "outsourcing" or "facilities management" services
whereby the Company manages a customer's data center and/or provides information
systems functions, both on-site at the customer's location and remotely from the
Company's Conway, Arkansas data center. In several of these instances, the
Company has licensed certain of its software to its customers, and has involved
certain of its customers as partial underwriters of and participants in its
research and development efforts. The two largest customers of the Company in
fiscal 1996 are in this category.
Under the Company's August 31, 1992 data center management agreement
with Trans Union Corporation ("Trans Union"), one of the three largest credit
bureaus in the U.S., the Company, through its subsidiary Acxiom CDC, Inc., is
managing Trans Union's data processing center in Chicago, Illinois, for annual
fees of approximately $25 million for the existing base capacity, with revenues
to be adjusted in the future for changes in Trans Union's capacity requirements.
In August 1994, the Company and Trans Union agreed to extend the data center
management agreement through August 2002, its full term of ten years. For
additional discussion, this information appears in Note 10 of the Notes to
Consolidated Financial Statements in the Company's Annual Report at p. 38, which
information is incorporated herein by reference. In addition, in December 1994 a
marketing services agreement was executed between the Company and Trans Union's
Marketing Services Division. Under the marketing services agreement, the Company
provides all of the data processing services for Trans Union's Marketing
Services Division. Management anticipates aggregate revenues in excess of $175
million over the eight-year life of the contract. The preceding statement is a
"forward-looking statement" for purposes of this Report and is qualified by the
cautionary language that appears under the heading "Forward-Looking Statements
or Information."
Under a five-year information management agreement dated September 14,
1992 with Allstate Insurance Company ("Allstate"), the Company, through its
subsidiary, Acxiom RM-Tools, Inc. ("Acxiom RM-T") (see discussion below) is
managing the outside purchasing and internal processing of the consumer data
Allstate uses for the underwriting of its lines of automobile insurance. These
functions were previously handled through Allstate's twenty-eight (28) regional
offices. The savings which result from the Company's management of this data are
shared equally by the Company and Allstate. Under the agreement, the Company
provides software systems and database management for Allstate to use in
connection with new auto insurance policies across the United States. In
addition, Allstate uses software systems developed by the Company to help
evaluate auto policy renewals and to market various types of insurance to new
and existing customers. Allstate has the right to obtain a non-transferable,
non-exclusive license to the Company's core software utilized in processing
Allstate's data, the Acxiom RM-Tools(SM) software product, upon payment of the
Company's standard software license fee. In January 1995 the Company and
Allstate signed an agreement to make the Acxiom RM-Tools software product,
developed by the Company and Allstate, accessible for use by other personal
lines property and casualty risk insurers. Through this software product,
insurers have access to an information package that includes motor vehicle
registration, automatic claims history, driver information, financial stability
information, vehicle verifications, property telephone inspections, property
replacement costs and property claims history. It is expected that utilization
of this product will streamline the underwriting process for these insurers,
reduce their expenses and lower their data acquisition costs. Like the Trans
Union agreement, the agreements with Allstate are in keeping with the Company's
strategy to obtain long-term, large-volume contracts which generate predictable
revenue. During the past fiscal year, Allstate accounted for approximately $55.8
million of the Company's total revenues.
Through Acxiom RM-T, the Company is pursuing contracts with other
insurance companies whereby Acxiom RM-T would provide information management
services to assist with the insurers' risk management, underwriting and
marketing functions. In 1994, Acxiom RM-T entered into a Software Development
and Joint Sales Agreement with Fair, Isaac and Company, Incorporated ("Fair
Isaac"), a leading developer of scoring technology for the insurance and credit
industries. Together, the two companies offer risk management information
services to the insurance industry. The Company and Fair Isaac are currently
developing demographic marketing scorecards for the personal lines insurance
industry segment.
The Company entered into an agreement, effective April 1, 1995, with
Automatic Data Processing ("ADP"). Pursuant to the agreement, ADP outsourced
certain of its ADP Claims Solutions Group, Inc.'s data processing functions to
the Company. These functions were transferred by the Company from Ann Arbor,
Michigan to the Company's Conway, Arkansas facilities in August 1995. The term
of the agreement is five (5) years, although ADP has the option to terminate the
agreement at the end of the second year of the agreement, subject to a $210,000
penalty provision. Annual revenues from the agreement are expected to generate
approximately $2 million. The preceding statement is a "forward-looking
statement" for purposes of this Report and is qualified by the cautionary
language that appears under the heading "Forward-Looking Statements or
Information."
In December 1995, the Company entered into a services agreement,
effective November 1, 1995, with The Polk Company ("Polk"), one of the largest
data compilation companies in the United States. Pursuant to the agreement, Polk
has outsourced certain of its data center functions to the Company. The term of
the agreement runs through March, 2006. The data center operations of Polk were
moved to the Company's data center facilities in Conway, Arkansas in May 1995.
Annual revenues from the agreement are expected to generate approximately $15
million, with aggregate revenues in excess of $150 million over the life of the
agreement. The preceding statement is a "forward-looking statement" for purposes
of this Report and is qualified by the cautionary language that appears under
the heading "Forward-Looking Statements or Information." The Company and Polk
have also entered into negotiations regarding definitive agreements for data
acquisition, product development, joint marketing, and technology sharing. In
the event the parties fail to execute definitive agreements for each of the
additional agreements, either party has the option to terminate the services
agreement.
It is the Company's intention to continue seeking
outsourcing/facilities management and information management agreements in the
future. Because of the Company's skills and technology in the area of data
processing, management believes that these types of agreements will provide
long-term benefits to the Company and will result in cost-effective data
processing solutions for its customers. The services currently provided by the
Company to such customers include data center management; information
management; hardware installation and support; account management systems;
installation, support and enhancement of software; customized software
programming; and licensing of the Company's proprietary software.
Data and Information Products.
DataQuick. In the past fiscal year, management has focused
upon data delivery as a core competency of the Company. The acquisition of
DataQuick in August 1995 and the recent acquisition of Pro CD (see "Recent
Developments," below) have opened up new markets to the Company. DataQuick
provides information products centered around real property information. This
information, distributed on-line and via CD-ROM, can support a broad range of
applications including marketing, appraisal, real estate, banking, mortgage and
insurance. For additional discussion, see Note 15 of the Notes to Consolidated
Financial Statements in the Company's Annual Report at pp. 40-41, which
information is incorporated herein by reference.
InfoBase. The primary business of InfoBase is the provision of
list enhancement services to companies engaged in direct marketing to consumers.
The household data which comprises the InfoBase IB Consumer(SM) database is
owned by data contributors who permit InfoBase to access their data for the
purpose of list enhancement, list analysis, segmentation modeling and merge/
purge screening. The type of data made available through InfoBase includes
consumer names and addresses, as well as such demographic information as age,
gender, approximate income brackets, occupation, marital status, the presence of
children, and car and home ownership. Management believes that the IBConsumer
database is the most complete database of its kind in the United States,
covering over 95% of all U.S. households.
In addition to its IBConsumer database, InfoBase offers a business
database, IBBusiness(SM). The IBBusiness database is used by customers engaged
in direct marketing to businesses. InfoBase also offers a computerized listing
(the "EDGE File") of all U.S. telephone book white page information.
With the recent acquisition of Pro CD, which also compiles a file of
white page telephone directories, the expense of compiling updates to the EDGE
file is expected to decrease. Pro CD will continue marketing its file on CD-ROM
to the small office/home office market and InfoBase will continue to market the
EDGE file to large-volume users. To date, the EDGE file has been sold to six (6)
users and resellers.
Pro CD. The April 1996 acquisition of Pro CD, a market-leading
provider of telephone and mapping data, including the Select Phone(TM) CD-ROM
product, will allow the Company, through retail channels, to solicit the
consumer and small business and home office markets. Pro CD's product line
includes telephone directories for the U.S. and Canada, integrated mapping
software, and related products and services. New reference titles are expected
to be introduced during fiscal year 1997. For more information regarding the
acquisition of Pro CD, see "Recent Developments," below.
GS/2000(R) Services. Subscription fulfillment data processing and
software services have been offered by the Company since 1989, when the Company
entered into a data processing agreement and software license with Guideposts
Associates, Inc. ("Guideposts"), one of the largest magazine publishers in the
U.S. Pursuant to the agreement, the Company assumed management of Guideposts'
data processing personnel, computer technology and operations. In addition, the
Company acquired an exclusive license to develop and market Guideposts'
proprietary magazine subscription fulfillment software ("GS/2000"), a modular
system that consolidates all aspects of subscription and book fulfillment and
that supports the marketing, accounting and customer service functions necessary
to a complete fulfillment operation. The Company extensively developed GS/2000
and has installed the software at three publishing companies and at one
membership and continuity organization.
In 1991 the Company entered into a six-year agreement with Fulfillment
Corporation of America ("FCA"), a recognized leader in the publishing
fulfillment service industry. Pursuant to the agreement, FCA agreed to be the
exclusive full-service provider of the Company's GS/2000 system to U.S. magazine
publishers. In addition, the Company agreed to outsource FCA's computer data
processing functions by linking FCA to the Company's computer facilities and
software systems in Conway, Arkansas. FCA was sold to Kable News Company, Inc.
("Kable") in January 1995, and it was decided at that time by the Company and
Kable to discontinue the relationship. As a result, the Company has no
full-service distribution channel for the GS/2000 product, an element that
management believes was crucial to developing a competitive product.
Consequently, the Company determined that, rather than a generic solution for
subscription fulfillment, the GS/2000 product can best be used as a custom
access service for the Company's customers. As such, the Company has
discontinued its efforts to market GS/2000 to new customers.
U.K. Promotional Services. In addition to the data processing services
offered by the Company in the U.K., the Company also provides comprehensive
promotional materials handling and fulfillment services to its U.K. customers.
Based upon its knowledge of the industry, management believes that it is one of
the largest firms of its kind in the U.K. Among the services provided are
promotional fulfillment, competition handling, in-bound
telemarketing and response handling, lead monitoring, contract packing and
mailing, and coupon redemption. Through the use of computerized tracking and
monitoring systems, the Company is able to provide customers with current
reports on the progress of their marketing campaigns and can furnish customers
with information useful for promotion analysis and subsequent database
campaigns. During the last fiscal year the Company mailed over 14,000,00
promotional items and custom-handled over 16,000,000 pieces of direct mail for
over 30 U.K. customers. In addition, the Company handled over 750,000 telephone
calls through its in-bound telemarketing and response handling service.
Customers
The Company's customers include large U.S. and U.K. financial
institutions, insurance companies, consumer credit organizations, seminar
companies, communications companies, catalogers, retailers, television shopping
networks, publishers, consumer goods manufacturers, membership and continuity
associations, and advertising agencies. Other customers include charities, list
users (direct mailers and telemarketers), list owners (customers who generate
and own their lists), and list managers and brokers (agents who manage lists and
provide direct marketing consulting services). Having developed its expertise by
servicing a traditional client base of companies which specialize in the direct
marketing industry, the Company is finding increasing demand for its products
and services within the marketing departments of large corporations as these
companies turn to targeted marketing techniques to sell their goods and
services. The Company is also experiencing a demand for its data processing and
information management services by companies that are not in the direct
marketing business. The Company's practice has been to extend payment terms to
its customers for periods of up to sixty days and, accordingly, the Company uses
operating capital to finance its accounts receivable. In fiscal 1996, the
following customers accounted for 10% or more of the Company's total revenue:
Allstate Insurance Company (20.7%) and Trans Union Corporation (15.5%).
Employees
The Company presently has approximately 3,098 employees.
The Direct Marketing Industry
General. The direct marketing industry is composed of businesses that
use direct mail order and other methods of direct consumer contact to promote
their products or services. Direct marketing service companies specialize in
marketing consultation, list compilation and management, creative and lettershop
services, data processing services and product fulfillment. Unlike traditional
forms of advertising which are aimed at a broad audience through print or
broadcast media, direct marketing involves targeted advertising sent directly to
potential customers. Historically, direct marketing programs have had a positive
response rate of approximately 1 to 3%. Consequently, direct marketers are
heavily dependent upon specific market information and the application of
statistics and computer modeling to assist them in predicting market behavior.
The products and services (see discussion above in "The Company's
Products and Services") offered by the Company are designed to assist its
customers to achieve a higher rate of return on their marketing investments by
selectively targeting their marketing efforts to individuals who are most likely
to respond.
The direct marketing industry has been negatively impacted during past
years by factors such as economic recessions and postal rate increases. The most
recent postal rate increase, which became effective in January 1995, and any
future increases will, in the Company's opinion, force direct mailers to mail
fewer pieces and to target their prospects more carefully. Through its software
products and data processing services, the Company has the capability to assist
its direct marketing customers to target their mailings to persons who are most
likely to favorably respond, thereby meeting its customers' increasing need to
market more effectively. The Company experienced no significant negative
financial impact as a result of the most recent postal rate increase.
In addition, the U.S. Postal Service recently announced a reclassifi-
cation of pre-sorted and barcoded mail rates to be implemented by July 1, 1996.
This reclassification, which includes increases in some rates as well as
reductions in others, generally rewards mailers who barcode their mailings.
The reclassification also renames certain classes of mail. The Company does not
expect any significant negative financial impact as a result of this recent
reclassification.
Consumer Privacy and Legislative Concerns. There could be an adverse
impact on the direct marketing industry due to an increase in public concern
over consumer privacy issues. Senior management of the Company has taken a
proactive role within the direct marketing industry to explore self-regulation
alternatives in the privacy arena. Internally, the Company has formulated and
distributed to each of its employees a written privacy policy which recognizes
consumers' rights to control the dissemination of information about themselves.
The privacy policy also states the Company's continuing commitment to strict
data security systems, as well as the Company's support of the Direct Marketing
Association's ("DMA") Mail and Telephone Preference Service programs, which
permit consumers to "opt-out" of unrequested marketing solicitations. The
Company has adopted a practice of purging its customers' lists of all names
appearing on such DMA opt-out lists free of charge. Employees of the Company are
required to sign a privacy acknowledgment form each year as a condition of
continued employment. Management is of the opinion that the measures which have
been put in place, together with the Company's continuing efforts to stay
informed and to take a leadership role in the area of privacy, will prevent the
Company from being materially impacted by the growing consumer awareness of
privacy issues.
Bills have been introduced in the 104th Congress seeking to amend the
Fair Credit Reporting Act ("FCRA"). The bills are similar to the versions that
have been introduced in prior years but which have failed to be enacted into
law. The primary effect of the bills is to provide consumers with easier access
to their credit reports and to facilitate the correction of errors in their
reports. The bills also address the issue of "prescreening," a procedure
utilized by many bankcard issuers and insurance companies in their direct
marketing programs. The bills as presently drafted would not have a material
adverse effect upon the Company, which has traditionally provided prescreening
services. It is, however, possible that some of the Company's customers could be
negatively impacted by these bills, in that they place more administrative
burdens upon consumer reporting agencies and upon merchants who report credit
transactions to the consumer reporting agencies. In addition to the federal
bills, there are numerous bills pending in various state legislatures. The
stated purpose of the majority of these bills is to give consumers more control
over how personal information concerning them is utilized in the marketplace.
While the Company is not opposed to the stated purpose of such bills, it is
possible that if certain of these bills are passed in their current form, the
Company could be negatively impacted as a result. Management actively monitors
legislation which could affect its business.
Competition
Traditional Direct Marketing Industry Services. The Company experiences
competition from other businesses in the direct marketing industry with respect
to certain targeted marketing services, including merge/purge, list enhancement,
and database services. For many years, the Company was the only service firm in
the United States offering a direct terminal access system by list users to
multiple list databases. Certain competitors now offer a direct terminal access
system to customers. While some direct competitors are divisions of larger
corporations having greater financial, research and development, and/or
marketing resources than the Company, management believes that the Company's
unique software enables it to effectively compete. Technological developments
are expected to continue at a rapid pace in the field of direct marketing
database management and market data collection, analysis and distribution.
Decision Support Software and Services. There are many diverse
businesses which offer decision support software and/or services. However,
management believes that, based upon the broad spectrum of software and services
in the marketplace, as well as the Company's unique data management services,
the effects of competition are minimal. In addition, management believes that by
using the TCP/IP protocol (discussed above under "The Company's Products and
Services"), the Company's products will be significantly less difficult to
implement at customer sites. Management further believes that through continued
investment in research and development, the Company will be able to maintain or
improve its present position in the marketplace. See "Research and Development,"
below.
Outsourcing/Facilities Management Services. The Company is aware of
numerous other major businesses which offer outsourcing or facilities management
services, and/or information management services. Due to the recent emergence of
this industry, and due to the fact that the market for such services remains
largely untapped, the Company anticipates that the effects of competition will
be minimal. With respect to software licensing, despite the existence of other
vendors, the Company likewise anticipates minimal competitive effects due to the
unique nature of the Company's software and the breadth of the potential
marketplace.
Data and Information Products. DataQuick has several competitors in
connection with the distribution of property data to the real estate, finance
and insurance industries. However, management believes that the expansion of
data coverage by DataQuick from regional to national, combined with timeliness
and reliability of its data, will place DataQuick among the market leaders.
There are two other companies which compete with InfoBase's primary
business of list enhancement services, and several other companies, including
some of the companies who contribute their data to InfoBase, which compete with
some of InfoBase's secondary lines of business. The Company is aware of no other
business which offers an optical scanning technology service similar to
InfoBase's. Management believes that InfoBase can effectively compete due to the
leadership position which it has established in the industry thus far and due to
its technical capabilities.
As for Pro CD, there are two other companies which compete with Pro
CD's primary business of providing telephone listings and mapping data to
consumers and small office/home office businesses. By providing comprehensive
data and maintaining its high accuracy rating, as well as the expected
introduction of new titles during fiscal 1997, management believes Pro CD can
maintain and improve its status as the market leader in this area.
GS/2000 Services. Due to the Company's decision in fiscal 1995 to
curtail the marketing of its GS/2000 software, the impact and the effects of
competition upon the Company are negligible. See "The Company's Products and
Services," above.
U.K. Promotional Services. Various aspects of the Company's U.K.
fulfillment business are performed by approximately fifteen other businesses in
the U.K., certain of which offer other services as well. However, management
knows of no other company which offers the complete range of services provided
by the Company, and believes that it will be able to maintain and improve its
present position in the industry by virtue of its continued technological
developments and concentration on providing high quality customer service.
Research and Development
In fiscal 1996 approximately $10.4 million, representing approximately
3.9% of the Company's consolidated revenue, was spent on software and research
and development, primarily involving the application and design of current
technologies to further upgrade and improve its software systems. In fiscal 1995
and 1994, the Company spent $8.1 million and $7.7 million, respectively.
Research and development projects which were begun in fiscal 1992 and continued
through fiscal 1996 have resulted in a material upgrade and restructuring of the
architecture of the Company's technology. Research and development costs
incurred prior to establishing the technological feasibility of products are
charged to operations as incurred.
Environment
Due to the nature of the Company's business, the Company has
experienced no material adverse effects based on its compliance with
environmental regulations. In addition, no material expenditures have been made
by the Company during the past two fiscal years and management does not expect
the necessity of any material capital expenditures during the coming fiscal year
for environmental control facilities.
Seasonality
Although some components of the Company's business have traditionally
experienced a heavier volume of business during the third and fourth calendar
quarters of each year, seasonal variances do not have a significant impact upon
the Company's operations as a whole.
Foreign Operations
The information required hereunder appears in Note 12 of the Notes to
Consolidated Financial Statements in the Company's Annual Report at p. 39, which
information is incorporated herein by reference.
Recent Developments
On April 1, 1996, the Company acquired substantially all of the assets
and assumed certain liabilities of DMI for Twenty-Five Million Dollars
($25,000,000). The purchase price is payable in three years and may, at DMI's
option, be paid in 1,000,000 shares of the Company's Common Stock in lieu of
cash. Headquartered in Greenwich, Connecticut, DMI provides list brokerage,
management and consulting services to business-to-business and consumer list
owners and mailers. See discussion above under "The Company's Products and
Services." In addition, on April 9, 1996, the Company acquired all of the
outstanding capital stock of Pro CD, a publisher of reference software on
CD-ROM. The Company exchanged 1,656,662 shares of its Common Stock for all of
the outstanding shares of capital stock of Pro CD. The Company also assumed all
of the outstanding options granted under Pro CD's employee stock option plans,
with the result that, as of April 9, 1996, 147,068 shares of the Company's
Common Stock were subject to issuance upon exercise of such options. The
acquisition was in the form of a merger of a wholly-owned subsidiary of the
Company into Pro CD and will be accounted for as a pooling of interests. Pro CD
is headquartered in Danvers, Massachusetts. See discussion above under "The
Company's Products and Services."
Item 2. Properties
The following table sets forth the location, ownership and general use
of the principal properties of the Company.
Location Held Use
Acxiom Corporation:
Conway, Arkansas Five facilities held in Principal executive
in fee; one facility offices, customer service
secures a $4,264,000 facilities and computer
encumbrance equipment space
Acxiom Transportation
Services, Inc.:
Conway, Arkansas Lease Office space; warehouse/
hanger space
Acxiom CDC, Inc.:
Chicago, Illinois Lease Office and computer
equipment space
Acxiom/Direct Media,
Inc.:
Greenwich, Connecticut Lease Office space; customer
service facility
Acxiom Great Lakes Data
Center, Inc.:
Taylor, Michigan Lease Office and computer
equipment space
Acxiom U.K., Ltd.:
(a) London, England Lease Office space; customer
service facility
(b) Sunderland,
England Held in fee Office space; computer
equipment and warehouse
space
(c) Hertfordshire,
England Lease Office space; customer
service facility
DQ Investment Corporation:
San Diego, California Lease Office space
DataQuick Information
Systems:
San Diego, California Lease Office space; customer
service facility
Pro CD, Inc.:
Danvers, Massachusetts Lease Office space; warehouse
space
The Company's headquarters are located in Conway, Arkansas and consist
of buildings housing the Company's principal executive offices and computer and
data processing center. The Company also leases office and warehouse/hanger
space located at the Conway Municipal Airport.
Pursuant to its data center management agreement with Trans Union
Corporation discussed above under Item 1, "Outsourcing/Facilities Management
Services," the Company leases office and computer equipment space at Trans
Union's corporate headquarters in Chicago, Illinois.
Pursuant to its data center management agreement with The Polk Company
discussed above under Item 1, "Outsourcing/Facilities Management Services," the
Company leases office and computer equipment space in Taylor, Michigan. In
addition, the Company leases office space in Brewery Park, Michigan, Cincinnati,
Ohio and Denver, Colorado in connection with the services the Company provides
to The Polk Company.
The Company's corporate and customer service operations in London,
England are presently housed in two principal buildings, both of which are
leased. The Company also owns a warehouse facility in Sunderland, England where
fulfillment services and data processing operations are housed.
As a result of the Company's acquisition of DataQuick Information
Services and DQ Investment Corporation, the Company leases two facilities in San
Diego, California. DataQuick Information Services also leases sales office space
in California, Arizona, Nevada, Oregon and Washington. Additionally, due to the
acquisition of DMI, the Company leases office space in California, Connecticut,
Florida, Illinois, New Hampshire, New York, North Carolina, Ohio and London,
England. In connection with the Company's acquisition of Pro CD, the Company
leases office and warehouse space in Danvers, Massachusetts, as well as sales
office space in California and Minnesota.
In addition to the foregoing, pursuant to the Guideposts data
processing agreement, Guideposts provides office and computer equipment space
for the Company's use at Guideposts' corporate headquarters in Carmel, New York.
Furthermore, the Company leases sales offices in California, Illinois, Kansas,
Massachusetts, New York, North Carolina, Texas, Virginia, Washington, D.C. and
Wisconsin.
The Company also leases office space in Ocean, New Jersey which
previously housed a catalog fulfillment software operation. The Company intends
to sublease the building for the remaining two years of the lease, and is
seeking a tenant. Also, in connection with the previous operation of its mailing
services division, the Company owns a facility in Warminster, Pennsylvania,
which it is presently leasing to a third party.
In general, the offices, customer service and data processing
facilities of the Company are in good condition. Management believes that its
facilities, including the expansion of the Conway, Arkansas data center and
construction of a new customer services building, both of which were completed
during fiscal year 1996 at the Conway location, are suitable and adequate to
meet the current needs of the Company. As such, management believes additional
properties will not be required upon expansion of operations during fiscal 1997.
A portion of the real property owned by the Company is pledged to secure notes
payable. For additional discussion, this information appears in Notes 4 and 5 of
the Notes to Consolidated Financial Statements in the Company's Annual Report at
pp. 33-34, which information is incorporated herein by reference.
Item 3. Legal Proceedings
The information required by this Item appears in Note 13 of the Notes
to Consolidated Financial Statements in the Company's Annual Report at pp.
39-40, which information is incorporated herein by reference.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
EXECUTIVE OFFICERS OF THE COMPANY
Each of the Company's executive officers, including his or her title,
age, and year of initial appointment as an executive officer and business
experience for the past five years, is listed below:
Year
Name Title Age Elected
Don W. Barrett (a) Senior Vice President 56 1994
Jennifer T. Barrett (b) Senior Vice President 46 1979
Robert S. Bloom (c) Chief Financial Officer 40 1992
Stephen H. Brighton (d) Senior Vice President 48 1993
James E. Bryant, Jr. (e) Senior Vice President 39 1996
Donald L. Cohn (f) Senior Vice President 65 1996
C. Alex Dietz (g) Senior Vice President and 53 1983
Chief Information Officer
Jerry C.D. Ellis (h) Senior Vice President 46 1991
Alan W. Holland (i) Senior Vice President 47 1996
Rodger S. Kline (j) Executive Vice President, 53 1975
Chief Operating Officer,
Treasurer and Director
Charles D. Morgan, Jr. (k) Chief Executive Officer, 53 1972
President and Chairman of
the Board of Directors
Mark Theilken (l) Senior Vice President 46 1995
Thomas B. Walker, Jr. (m) Senior Vice President 47 1993
James T. Womble (n) Executive Vice President 53 1975
and Director
Paul L. Zaffaroni (o) Senior Vice President 49 1990
- ------------------------------------
(a) Mr. Barrett joined the Company in 1984 as Vice President. He was elected
Sr. Vice President in 1993. Prior to joining the Company, he had worked
for eighteen years for IBM Corporation, where he held various marketing
management positions. Mr. Barrett holds a degree in mathematics from the
University of Central Arkansas.
(b) Mrs. Barrett joined the Company in 1974. She was elected Vice President
in 1979 and was elected Sr. Vice President in 1993. Prior to joining the
Company, she served as a data processing specialist for the State of
Arkansas. Mrs. Barrett holds degrees in mathematics and computer science
from the University of Texas.
(c) Mr. Bloom joined the Company in 1992 as Chief Financial Officer. Prior to
joining the Company, he was employed for six years with Wilson Sporting
Goods Co. as Chief Financial Officer of its International Division. Prior
to his employment with Wilson, Mr. Bloom was employed by Arthur Andersen
& Co. for nine years, serving most recently as Manager. Mr. Bloom, a
Certified Public Accountant, holds a degree in accounting from the
University of Illinois.
(d) Mr. Brighton joined the Company in 1989 as a director of sales and was
subsequently named President and CEO of InfoBase Services in 1991, a
position he held until October 1, 1993. At that time, he left InfoBase
Services and he was elected Senior Vice President of the Company. Prior to
joining the Company, he was employed for 13 years with IBM Corporation,
serving most recently as Marketing Branch Manager. Mr. Brighton holds a
degree in mechanical engineering from the U.S. Naval Academy, Annapolis,
Maryland.
(e) Mr. Bryant joined the Company in 1996 as Senior Vice President in
conjunction with the Company's acquisition of Pro CD. Prior to joining the
Company he cofounded and was employed by Pro CD for five years, serving as
President and CEO.
(f) Mr. Cohn joined the Company in 1996 as Senior Vice President in conjunction
with the Company's acquisition of DataQuick. Prior to joining the Company
he founded and was employed by DataQuick for sixteen years, most recently
serving as Chairman of the Board. Mr. Cohn holds a degree in bacteriology
from the University of California at Los Angeles.
(g) Mr. Dietz rejoined the Company in 1979. He first joined the Company in 1969
and served as a Vice President until 1975. Between 1975 and 1979 he was an
officer of a commercial bank responsible for data processing matters.
Following his return to the Company in 1979, Mr. Dietz was subsequently
elected Vice President in 1983 and was named Chief Information Officer
in 1991. In 1993 he was elected Senior Vice President. Mr. Dietz holds
a degree in electrical engineering from Tulane University.
(h) Mr. Ellis joined the Company in 1991 as Managing Director of the Company's
U.K. operations. In 1994 he was elected Senior Vice President. Prior to
1991, Mr. Ellis was employed for 22 years with IBM, serving most recently
as Assistant to the Chairman and Chief Executive Officer of IBM's U.K.
operations. Prior to that, Mr. Ellis served as Branch Manager of the IBM
U.K. Public Sector division.
(i) Mr. Holland joined the Company in 1991. In 1995 he was elected Senior Vice
President. Prior to joining the Company he was employed by IBM Corporation
for 17 years, most recently serving as Branch
Manager of Professional Services. Mr. Holland holds a degree in mathematics
from the University of Arkansas at Little Rock.
(j) Mr. Kline joined the Company in 1973. Since 1975 he has been Executive Vice
President and a director. In 1988 he assumed the additional
responsibilities of Treasurer and Chief Information Officer. In June 1991,
Mr. Kline was named Chief Operating Officer, Executive Vice President and
Treasurer. Prior to joining the Company, Mr. Kline was employed by IBM
Corporation. Mr. Kline holds a degree in electrical engineering from the
University of Arkansas.
(k) Mr. Morgan joined the Company in 1972 and has served as Chief Executive
Officer and Chairman of the Board of Directors since 1975. In 1991 he
assumed the additional title of President. He was employed by IBM
Corporation prior to joining the Company. Mr. Morgan holds a mechanical
engineering degree from the University of Arkansas.
(l) Mr. Theilken joined the Company in 1995 as a Business Unit Executive. In
1996 he was elected Senior Vice President. Prior to joining the Company
he was employed by IBM Corporation for 23 years, most recently serving
as Director of Marketing, Personal Software Products. Mr. Theilken holds
a degree in mathematics from the University of Illinois.
(m) Mr. Walker joined the Company in 1990. In 1993 he was elected Senior Vice
President. Prior to joining the Company he was employed by IBM Corporation
for 18 years, most recently serving as Branch Marketing Support Manager.
Mr. Walker holds a degree in industrial engineering from the University of
Arkansas.
(n) Mr. Womble joined the Company in 1974. In 1975 he was elected Vice
President and a director. In 1982 he was elected Executive Vice President.
Prior to joining the Company, Mr. Womble was employed by IBM Corporation.
Mr. Womble holds a degree in civil engineering from the University of
Arkansas.
(o) Mr. Zaffaroni joined the Company in 1990 as Vice President. In 1993 he was
elected Senior Vice President. Prior to joining the Company he was employed
by the IBM Corporation for 21 years, most recently serving as Regional
Sales Manager for the Mid-America Area. Mr. Zaffaroni holds a degree in
marketing from Youngstown State University.
With the exception of Mr. and Mrs. Barrett, who are married, there are no
family relationships among any of the Company's executive officers and/or
directors.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
The information required by this Item appears in the Company's Annual
Report at p. 44, which information is incorporated herein by reference.
Item 6. Selected Financial Data
The information required by this Item appears in the Company's Annual
Report at p. 21, which information is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The information required by this Item appears in the Company's Annual
Report at pp. 22-25, which information is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The Financial Statements required by this Item appear in the Company's
Annual Report at pp. 26-41, which information is incorporated herein by
reference. The Financial Statement Schedule which constitutes the Supplementary
Data required by this Item is attached hereto.
Item 9. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
Pursuant to general instruction G(3) of the instructions to Form 10-K,
information concerning the Company's executive officers is included under the
caption "Executive Officers of the Company" at the end of Part I of this Report.
The remaining information required by this Item appears under the caption
"Election of Directors" in the Company's 1996 Proxy Statement at pp. 4-5 and
under the caption "Section 16(a) Reporting Delinquencies" in the Company's 1996
Proxy Statement at p. 15, which information is incorporated herein by reference.
Item 11. Executive Compensation
The information required by this Item appears under the heading
"Compensation of Directors and Executive Officers" in the Company's 1996 Proxy
Statement at pp. 8-12, which information is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this Item appears under the headings
"Principal Shareholders" and "Equity Ownership of Directors and Executive
Officers" in the Company's 1996 Proxy Statement at pp. 2-3, which information is
incorporated herein by reference.
Item 13. Certain Relationships and Transactions
The information required by this Item appears under the heading
"Certain Transactions" in the Company's 1996 Proxy Statement at pp. 14-15, which
information is incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
The following documents are filed as a part of this Report:
1. Financial Statements.
The following consolidated financial statements of
the registrant and its subsidiaries included on pages 26 through 41 of the
Company's Annual Report and the Independent Auditors' Report on page 42 thereof
are incorporated herein by reference. Page references are to page numbers in the
Annual Report.
Page
Consolidated Balance Sheets as of March 31, 1996 and 1995 26
Consolidated Statements of Earnings for the years ended
March 31, 1996, 1995 and 1994 27
Consolidated Statements of Stockholders' Equity for the
years ended March 31, 1996, 1995 and 1994 28-29
Consolidated Statements of Cash Flows for the years ended
March 31, 1996, 1995 and 1994 30
Notes to the Consolidated Financial Statements 31-41
Independent Auditors' Report 42
2. Financial Statement Schedules.
The following additional information for the years
1996, 1995 and 1994 is submitted herewith and appears on the two pages
immediately preceding the signature page of this Report on Form 10-K.
Independent Auditors' Report
Schedule II - Valuation and Qualifying Accounts for the years ended March 31,
1996, 1995 and 1994
All other schedules are omitted because they are not applicable or
not required or because the required information is included in the financial
statements or notes thereto.
3. Exhibits and Executive Compensation Plans.
The following exhibits are filed with this Report or
are incorporated by reference to previously filed material.
Exhibit No.
3(a) Amended and Restated Certificate of Incorporation (previously filed
as Exhibit 4.1 to registration No. 33-63423, and incorporated herein by
reference)
3(b) Amended and Restated Bylaws (previously filed as Exhibit 3(b) to the
Company's Annual Report on Form 10-K for the fiscal year ended March
31, 1991, Commission File No. 0-13163, and incorporated herein by
reference)
10(a) Data Center Management Agreement dated July 27, 1992 between the
Company and Trans Union Corporation (previously filed as Exhibit A to
Schedule 13-D of Trans Union Corporation dated August 31, 1992,
Commission File No. 5-36226, and incorporated herein by reference)
10(b) Agreement to Extend and Amend Data Center Management Agreement and to
Amend Registration Rights Agreement dated August 31, 1994 (previously
filed as Exhibit 10(b) to Form 10-K for the fiscal year ended March 31,
1995, as amended, in 0-13163, and incorporated herein by reference)
10(c) Agreement for Professional Services dated November 23, 1992 between the
Company and Allstate Insurance Company (previously filed as Exhibit 28
to Amendment No. 1 to the Company's Current Report on Form 8-K dated
December 9, 1992, Commission File No. 0-13613, and incorporated herein
by reference)
10(d) Acxiom Corporation Deferred Compensation Plan (previously filed as
Exhibit 10(b) to the Company's Annual Report on Form 10-K for the
fiscal year ended March 31, 1990, Commission File No. 0-13163, and
incorporated herein by reference)
10(e) Amended and Restated Key Associate Stock Option Plan of Acxiom
Corporation
10(f) Acxiom Corporation U.K. Share Option Scheme
10(g) Long-Term Executive Compensation Plan (previously filed as Exhibit
10(g) to the Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1993, Commission File No. 0-13163, and incorporated
herein by reference)
10(h) Annual Executive Compensation Plan (Fiscal 1997)
10(i) Acxiom Corporation Non-Qualified Deferred Compensation Plan
10(j) Asset Purchase Agreement dated April 1, 1996 between the Company and
Direct Media/DMI, Inc. (previously filed as Exhibit 2 to the Company's
Current Report on Form 8-K dated April 30, 1996, Commission File No.
0-13613, and incorporated herein by reference)
13 Portions of the Company's Annual Report
21 Subsidiaries of the Company
23 Consent of KPMG Peat Marwick LLP
24 Powers of Attorney for Robert S. Bloom, Dr. Ann H. Die, William T.
Dillard II, Harry L. Gambill, Rodger S. Kline, Charles D. Morgan, Jr.,
Robert A. Pritzker, Walter Smiley and James T. Womble
27 Financial Data Schedule
Listed below are the executive compensation plans and arrangements
currently in effect and which are required to be filed as exhibits to this
Report:
- Amended and Restated Key Associate Stock Option Plan
of Acxiom Corporation
- Acxiom Corporation U.K. Share Option Scheme
- Long-Term Executive Compensation Plan
- Acxiom Corporation Deferred Compensation Plan*
- Annual Executive Compensation Plan (Fiscal 1997)
- Acxiom Non-Qualified Deferred Compensation Plan
- -------------------------------
* To date, only one grant has been made, in 1990.
4. Reports on Form 8-K.
The Company filed a Current Report on Form 8-K dated April 30, 1996
relating to the acquisition of DMI.
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Acxiom Corporation:
Under date of May 9, 1996, we reported on the consolidated balance sheets of
Acxiom Corporation and subsidiaries as of March 31, 1996 and 1995, and the
related consolidated statements of earnings, stockholders' equity and cash flows
for each of the years in the three-year period ended March 31, 1996, as
contained in the 1996 annual report to shareholders. These consolidated
financial statements and our report thereon are incorporated by reference in the
annual report on Form 10-K for the year ended March 31, 1996. In connection with
our audits of the aforementioned consolidated financial statements, we also have
audited the related financial statement schedule as listed in the accompanying
index. This financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion on this financial
statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
/s/ KPMG Peat Marwick LLP
Little Rock, Arkansas
May 9, 1996
Schedule II
ACXIOM CORPORATION AND SUBSIDIARIES
Valuation and Qualifying Accounts
Years ended March 31, 1996, 1995 and 1994
Additions
Balance at charged to Other Bad debts Bad Balance
beginning costs and additions written debts at end
of period expenses (note) off recovered of period
1996:
Allowance
for
doubtful
accounts
and
credits $ 2,143,000 150,000 131,000 726,000 182,000 1,880,000
========= ======= ======= ======= ======= =========
1995:
Allowance
for
doubtful
accounts
and
credits $ 1,086,000 1,656,000 178,000 803,000 26,000 2,143,000
========= ========= ======= ======= ====== =========
1994:
Allowance
for
doubtful
accounts
and
credits $ 1,049,000 970,000 - 945,000 12,000 1,086,000
========= ========= ======= ======= ====== =========
Note - Other additions in 1996 represent the valuation accounts acquired in the
Generator and DataQuick purchases. Other additions in 1995 represent the
valuation account acquired in the InfoBase purchase.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
ACXIOM CORPORATION
Date: June 25, 1996 By: /s/ Catherine L. Hughes
------------------------------------
Catherine L. Hughes
Secretary and General Counsel
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature
Robert S. Bloom* Chief Financial Officer June 25, 1996
- --------------------------- (Principle accounting officer)
Robert S. Bloom
Dr. Ann H. Die* Director June 25, 1996
- ---------------------------
Dr. Ann H. Die
William T. Dillard II* Director June 25, 1996
- ---------------------------
William T. Dillard II
Harry C. Gambill* Director June 25, 1996
- ---------------------------
Harry C. Gambill
Rodger S. Kline* Executive Vice President, June 25, 1996
- --------------------------- Chief Operating Officer,
Rodger S. Kline Treasurer and Director
(Principle financial officer)
Charles D. Morgan, Jr.* Chairman of the Board and June 25, 1996
- --------------------------- President (Principle
Charles D. Morgan, Jr. executive officer)
Robert A. Pritzker* Director June 25, 1996
- ---------------------------
Robert A. Pritzker
Walter V. Smiley* Director June 25, 1996
- ---------------------------
Walter V. Smiley
James T. Womble* Director June 25, 1996
- ---------------------------
James T. Womble
*By: /s/ Catherine L. Hughes
----------------------------
Catherine L. Hughes
Attorney-in-Fact
EXHIBIT INDEX
Exhibits to Form 10-K
Exhibit No. Exhibit
3(a) Amended and Restated Certificate of Incorporation (previously filed as
Exhibit 4.1 to registration No. 33-63423, and incorporated herein by
reference)
3(b) Amended and Restated Bylaws (previously filed as Exhibit 3(b) to the
Company's Annual Report on Form 10-K for the fiscal year ended March
31, 1991, Commission File No. 0-13163, and incorporated herein by
reference)
10(a) Data Center Management Agreement dated July 27, 1992 between the
Company and Trans Union Corporation (previously filed as Exhibit A to
Schedule 13-D of Trans Union Corporation dated August 31, 1992,
Commission File No. 5-36226, and incorporated herein by reference)
10(b) Agreement to Extend and Amend Data Center Management Agreement and to
Amend Registration Rights Agreement dated August 31, 1994 (previously
filed as Exhibit 10(b) to Form 10-K for the fiscal year ended March 31,
1995, as amended, in 0-13163, and incorporated herein by reference)
10(c) Agreement for Professional Services dated November 23, 1992 between the
Company and Allstate Insurance Company (previously filed as Exhibit 28
to Amendment No. 1 to the Company's Current Report on Form 8-K dated
December 9, 1992, Commission File No. 0-13613, and incorporated herein
by reference)
10(d) Acxiom Corporation Deferred Compensation Plan (previously filed as
Exhibit 10(b) to the Company's Annual Report on Form 10-K for the
fiscal year ended March 31, 1990, Commission File No. 0-13163, and
incorporated herein by reference)
10(e) Amended and Restated Key Associate Stock Option Plan of Acxiom
Corporation
10(f) Acxiom Corporation U.K. Share Option Scheme
10(g) Long-Term Executive Compensation Plan (previously filed as Exhibit
10(g) to the Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1993, Commission File No. 0-13163, and incorporated
herein by reference)
10(h) Annual Executive Compensation Plan (Fiscal 1997)
10(i) Acxiom Corporation Non-Qualified Deferred Compensation Plan
10(j) Asset Purchase Agreement dated April 1, 1996 between the Company and
Direct Media/DMI, Inc. (previously filed as Exhibit 2 to the Company's
Current Report on Form 8-K dated April 30, 1996, Commission File No.
0-13613, and incorporated herein by reference)
13 Portions of the Company's Annual Report
21 Subsidiaries of the Company
23 Consent of KPMG Peat Marwick LLP
24 Powers of Attorney for Robert S. Bloom, Dr. Ann H. Die, William T.
Dillard II, Harry L. Gambill, Rodger S. Kline, Charles D. Morgan, Jr.,
Robert A. Pritzker, Walter Smiley and James T. Womble
27 Financial Data Schedule
EXHIBIT 10(e)
AMENDED AND RESTATED KEY ASSOCIATE STOCK OPTION PLAN
OF
ACXIOM CORPORATION
as of May 24, 1995
1. Establishment, Continuation, and Purpose. On November 9, 1983, the
Board of Directors (the "Board") and the shareholders of Acxiom Corporation
(formerly CCX Network, Inc.) (the "Company") approved the adoption of the CCX
Network, Inc. Incentive Stock Option Plan and the CCX Network, Inc. Nonstatutory
Stock Option Plan. Such plans were amended and restated effective as of April
22, 1987 so as to combine the two separate plans into one plan (the "Plan") and
to comply with certain provisions of the Tax Reform Act of 1986. Subsequent
amendments were adopted on July 20, 1988; January 30, 1991; May 26, 1993; and
May 24, 1995. The purpose of the Plan is to further the growth and development
of the Company and any of its present or future subsidiary corporations, as
hereinafter defined, by granting to certain key associates of the Company and
any subsidiary corporation, as an incentive and encouragement to stock
ownership, options to purchase shares of common stock of the Company, $.10 par
value ("Common Stock"), thereby offering such key associates a proprietary
interest in the Company's business and a more direct stake in its continuing
welfare, and aligning their interests with those of the Company's stockholders.
2. Administration. The Plan shall be administered by a committee (the
"Committee") of no less than two "disinterested" (as that term is defined in
Rule 16b-3 of the Securities Exchange Act of 1934, as amended (the "Act"))
members of the Company's Board of Directors. The Committee is authorized to
grant options on behalf of the Company as hereinafter provided, to interpret the
Plan and options granted pursuant to the Plan, and to make and amend such
regulations as it may deem appropriate.
3. Grant of Options. Options to purchase shares of Common Stock shall
be granted on behalf of the Company by the Committee from time to time and
within the limits of the Plan. The Committee shall determine the key associates
("Optionees" or "Participants") of the Company and of any subsidiary corporation
to whom options are to be granted, the number of shares to be granted to each,
the option price, the option period(s), and the number of shares that may be
exercised during such option period(s). Options granted under the Plan may be
either non-qualified stock options or incentive stock options, as defined by
Section 422A of the Internal Revenue Code of 1986, as amended (the "Code"). The
Committee, at the time each option is granted, shall designate such option as
either a non-qualified stock option or an incentive stock option. Any incentive
stock option granted under the Plan must be exerciseable within ten (10) years
of the date upon which it is granted. For incentive options granted after
December 31, 1986, the aggregate fair market value (as determined at the time
the option is granted) of the stock with respect to which incentive options
granted herein are exerciseable for the first time by any Optionee during any
calendar year (under all plans of the Company and its subsidiaries) shall not
exceed $100,000.
4. Shares Subject to the Plan. The shares which may be granted
pursuant to the Plan shall be authorized and unissued shares of Common Stock not
exceeding in the aggregate 7,600,000 shares.
5. Eligible Participants. All key associates of the Company and any
subsidiary corporation of the Company shall be eligible to receive options and
thereby become Participants in the Plan. In granting options, the Board may
include or exclude previous Participants in the Plan. As used herein, the terms
"subsidiary corporation" and "parent corporation" shall mean a "subsidiary
corporation" or "parent corporation" as defined in Section 425 of the Code.
For purposes of this Plan, a "key associate" shall mean an associate of
the Company or its affiliates, including officers (whether or not they are
directors), who render those types of services which tend to contribute
materially to the success of the Company or an affiliate or which reasonably may
be anticipated to contribute materially to the future success of the Company or
an affiliate. No director or officer of the Company or any subsidiary
corporation shall be eligible to receive options under the Plan unless such
director or officer is also a key associate of the Company or one of its
subsidiary corporations.
No executive officer named in the Summary Compensation Table of the Company's
then current Proxy Statement shall be eligible to receive in excess of 300,000
options in any three-year period.
6. Option Price. (a) The price for each share of Common Stock
purchasable under any incentive option shall be not less than one hundred
percent (100%) of the fair market value per share on the date of grant. The
price for each share of Common Stock purchasable under any non-qualified option
shall be any price determined by the Committee in its sole discretion. All such
prices shall be subject to adjustment as provided for in paragraph 17 hereof.
For purposes of determining the fair market value of the Common Stock, the
following rules shall apply:
(i) If the Common Stock is at the time listed or admitted to
trading on any stock exchange, then the fair market value shall be
either (a) the closing sales price of the Common Stock on the date in
question on the principal exchange on which the Common Stock is then
listed or admitted to trading, or (b) the average bid and ask price for
the ten (10) trading days preceding the week during which the Committee
grants options. With respect to (a), if no reported sale of the Common
Stock takes place on the date in question on the principal exchange,
then the fair market value shall be determined as of the closest
preceding date on which such principal exchange shall be have been open
for business and shares of the Common Stock were traded.
(ii) If the Common Stock is not at the time listed or admitted
to trading on a stock exchange, the fair market value shall be the mean
between the closing bid and asked quotations for the Common Stock on
the date in question in the over-the-counter market, as such prices are
reported in a publication of general circulation selected by the
Company and regularly reporting the market price of the Common Stock in
such market. If there are no bid and asked quotations for the Common
Stock on such date, the fair market value shall be deemed to be the
mean between the closing bid and asked quotations in the
over-the-counter market for the Common Stock on the closest date
preceding the date in question for which such quotations are available.
(b) If any Optionee to whom an incentive option is to be granted under
the Plan is on the date of grant the owner of stock (as determined under Section
425(d) of the Code) possessing more than 10% of the total combined voting power
of all classes of stock of the Company or any one of its subsidiaries, then the
following special provisions shall be applicable to any options granted to such
individual:
(i) The option price per share of Common Stock
subject to such option shall not be less than 110% of the fair
market value of one share of Common Stock on the date of
grant; and
(ii) The option shall not have a term in excess of
five (5) years from the date of grant.
7. Exercise Period. Subject to paragraph 18, the period for
exercising an option (the "Exercise Period") shall be such period of time as may
be designated by the Committee at the time of grant, except that:
(a) If a Participant retires during the Exercise Period, such
option shall be exerciseable only during the three months following the
effective date of retirement, but in no event after the expiration of
the Exercise Period, unless the Committee in its discretion provides
otherwise.
(b) If a Participant terminates his or her employment by
reason of disability, such option shall be exerciseable only during the
six months following such termination, but in no event after the
expiration of the Exercise Period, unless the Committee in its
discretion provides otherwise.
(c) If a Participant dies during the Exercise Period, such
option shall be exerciseable by the executors, administrators, legatees
or distributees of the Participant's estate only during the twelve
months following the date of death, but in no event after the
expiration of the Exercise Period, unless the Committee in its
discretion provides otherwise.
(d) If a Participant ceases to be an associate of the Company
for any cause other than retirement, disability or death, such option
shall be exerciseable only during the three months following such
termination, but in no event after the expiration of the Exercise
Period, unless the Committee in its discretion provides otherwise.
The maximum duration of any incentive stock option granted under the
Plan shall be ten (10) years from the date of grant, although such options may
be granted for a lesser duration. The Committee shall have the right to
accelerate, in whole or in part, from time to time, conditionally or
unconditionally, a Participant's rights to exercise any option granted
hereunder.
8. Exercise of Option. Subject to paragraphs 7(a), 7(b), 7(c), 7(d) and
18, an option may be exercised at any time and from time to time during the
Exercise Period. If one of the events referred to in paragraphs 7(a), 7(b), 7(c)
or 7(d) occurs, the option shall be exerciseable (subject to paragraph 18) under
this paragraph 8 during the three months following retirement, during the six
months following termination by reason of disability, during the twelve months
following death, or during the three months following termination for any other
reason, only as to the number of shares, if any, as to which the option was
exerciseable immediately prior to said retirement, disability, death or other
termination, unless the Committee in its discretion provides otherwise.
Notwithstanding the foregoing, with respect to any incentive stock
option granted under the Plan prior to January 1, 1987, no such incentive stock
option shall be exerciseable by a Participant while there is outstanding any
other incentive stock option which was previously granted to the Participant to
purchase shares in the Company or in a corporation which (at the time of the
granting of such option) is a parent or subsidiary corporation of the Company,
or is a predecessor corporation of any such corporation. This provision shall
not apply to any options granted after December 31, 1986. For purposes of this
paragraph 8, any incentive stock option shall be treated as outstanding until
such option is exercised in full or expires by reason of lapse of time.
9. Payment for Shares. Full payment for shares purchased, together with
the amount of any tax or excise due in respect of the sale and issue thereof,
shall be made in such form of property (whether cash, securities or other
consideration) as may be acceptable to the Committee. The Company will issue no
certificates for shares until full payment therefor has been made, and a
Participant shall have none of the rights of a shareholder until certificates
for the shares purchased are issued to him or her. In lieu of cash, a
Participant may pay for the shares purchased with shares of the Company's Common
Stock having a fair market value on the date upon which the Participant
exercises his or her option equal to the option price, or with a combination of
cash and shares of Common Stock equal to the aggregate option price. For
purposes of determining fair market value, the rules set forth in paragraph 6
shall apply.
10. Withholding Taxes. The Company may require a Participant exercising
a non-qualified option granted hereunder to reimburse the Company (or the
subsidiary which employs such Participant) for taxes required by any government
to be withheld or otherwise deducted and paid by such corporation in respect of
the issuance of the shares. For purposes of determining fair market value, the
rules set forth in Paragraph 6 shall apply. A Participant may elect to satisfy
such withholding requirements by any one of the following methods:
(a) A Participant may request that the Company (or the
subsidiary which employs such Participant) withhold from the number of
shares which would otherwise be issued to the Participant that number
of shares (based upon the fair market value of the Common Stock on the
date of exercise) which would satisfy the withholding requirement. If
such an election is made, the Participant must notify the Company that
he or she is so electing either (i) six months prior to the date the
option exercise becomes taxable (which will either be the date of
exercise or, if an election under Section 83(b) of the Code is made,
six months before the date of exercise), or (ii) during any period
beginning on the third business day following the date upon which any
quarterly or annual sales and earnings statement is released by the
Company and ending on the thirtieth day following the release of any
such statement, such notice provisions being applicable
only to those Participants who are "executive officers," as defined in
the Act, or directors of the Company.
(b) A Participant may deliver previously-owned shares of
Common Stock (based upon the fair market value of the Common Stock on
the date of exercise) in an amount which would satisfy the withholding
requirement.
(c) A Participant may deliver cash in an amount which would
satisfy the withholding requirement.
11. Stock Appreciation Rights. The Committee may, under such terms and
conditions as it deems appropriate, authorize the surrender by an Optionee of
all or part of an unexercised option and authorize a payment in consideration
therefor of an amount equal to the difference obtained by subtracting the option
price of the shares then subject to exercise under such option from the fair
market value of the Common Stock represented by such shares on the date of
surrender, provided that the Committee determines that such settlement is
consistent with the purpose of the Plan. Such payment may be made in shares of
Common Stock valued at their fair market value on the date of surrender of such
option or in cash, or partly in shares and partly in cash. Acceptance of such a
surrender and the manner of payment shall be in the discretion of the Committee,
subject to the limitations contained in Section 422A of the Code and Section
16b(3) of the Act. For purposes of determining fair market value, the rules set
forth in Paragraph 6 shall apply. If an option is surrendered pursuant to this
Paragraph 11, the shares covered by the surrendered option will not thereafter
be available for grant under the Plan.
12. Loans or Guarantee of Loans. The Committee may authorize the
extension of a loan to an Optionee by the Company (or the guarantee by the
Company of a loan obtained by an Optionee from a third party) in order to assist
an Optionee to exercise an option granted under the Plan. The terms of any loans
or guarantees, including the interest rate and terms of repayment, will be
subject to the discretion of the Committee. Loans and guarantees may be granted
without security, the maximum credit available being the exercise price of the
option sought to be executed plus any federal and state income tax liability
incurred upon exercise of the option.
13. Nonassignability. Each option by its terms shall not be
transferable otherwise than by will or the laws of descent and distribution, and
shall be exerciseable during a Participant's lifetime only by him.
14. Conditions to Exercise of Options. The Committee may, in its
discretion, require as conditions to the exercise of options and the issuance of
shares thereunder either (a) that a registration statement under the Securities
Act of 1933, as amended, with respect to the options and the shares to be issued
upon the exercise thereof, containing such current information as is required by
the Rules and Regulations under said Act, shall have become, and continue to be,
effective; or (b) that the Participant (i) shall have represented, warranted and
agreed, in form and substance satisfactory to the Company, both that he or she
is acquiring the option and, at the time of exercising the option, that he or
she is acquiring the shares for his/her own account, for investment and not with
a view to or in connection with any distribution; (ii) shall have agreed to
restrictions on transfer, in form and substance satisfactory to the Company; and
(iii) shall have agreed to an endorsement which makes appropriate reference to
such representations, warranties, agreements and restrictions both on the option
and on the certificate representing the shares.
15. Conditions to Effectiveness of the Plan. No option shall be granted
or exercised if the grant of the option, or the exercise and the issuance of
shares pursuant thereto, would be contrary to law or the regulations of any duly
constituted authority having jurisdiction.
16. Alteration, Termination, Discontinuance, Suspension, or Amendment.
The Board, in its discretion, may alter, terminate, discontinue, suspend or
amend the Plan at any time. The Board may not, however, without shareholder
approval (except as provided below in paragraph 17), (i) materially increase the
maximum number of shares subject to the Plan, (ii) materially increase the
benefits accruing to Participants under the Plan, or (iii) materially modify the
requirements as to eligibility for participation in the Plan or, without the
consent of the
affected Participant, change, alter or impair any option previously granted to
him under the Plan (except as provided below in paragraph 18). The Committee
shall be authorized to amend the Plan and the options granted thereunder to
permit the options to qualify as incentive stock options under Section 422A of
the Code and the regulations promulgated thereunder. The rights and obligations
under any option granted before amendment of the Plan or any unexercised portion
of such option shall not be adversely affected by amendment of the Plan or the
option without the consent of the holder of the option.
17. Effect of Changes in Common Stock. If the Company shall combine,
subdivide or reclassify the shares of Common Stock which have been or may be
subject to the Plan, or shall declare thereon any dividend payable in shares of
Common Stock, or shall reclassify or take any other action of a similar nature
affecting the Common Stock, then the number and class of shares of Common Stock
which may thereafter become subject to options (in the aggregate and to any
Participant) shall be adjusted accordingly, and, in the case of each option
outstanding at the time of any such action, the number and class of shares which
may thereafter be purchased pursuant to such option and the option price per
share shall be adjusted to such extent as may be determined by the Committee to
be necessary to preserve unimpaired the rights of the Participants, and each and
every such determination shall be conclusive and binding upon such Participants.
18. Reorganization. In case of any one or more reclassifications,
changes or exchanges of outstanding shares of Common Stock or other stock (other
than as provided in paragraph 17), or consolidations of the Company with, or
mergers of the Company into other corporations, or other recapitalizations or
reorganizations (other than transactions in which the Company continues to exist
and which do not result in any reclassification change or exchange of
outstanding shares of the Company), or in case of any one or more sales or
conveyances to another corporation of the property of the Company as an
entirety, or substantially an entirety (any and all of which are referred to in
this paragraph 18 as "Reorganization(s)"), the holder of each option then or
thereafter outstanding shall have the right, upon any subsequent exercise
thereof, to acquire the same kind and amount of securities and property which
such holder would then hold if such holder had exercised the option immediately
before the first of any such Reorganization, and continued to hold all
securities and property which came to such holder as a result of that and any
subsequent Reorganization, less all securities and property surrendered or
canceled pursuant to any of same, the adjustment rights in paragraph 17 and this
paragraph 18 being continuing and cumulative; provided, that notwithstanding any
provisions of paragraph 7 to the contrary, the Committee shall have the right in
connection with any such Reorganization, upon not less than thirty (30) days,
written notice to the holders of outstanding options, to terminate the Exercise
Period, and in such event all outstanding options (other than options as to
which one of the events referred to in paragraph 7 has occurred) may be
exercised only to the extent thereby permitted, in each case only at a time
prior to such Reorganization. A liquidation shall be deemed a Reorganization for
the foregoing purpose.
19. Use of Proceeds. Proceeds realized from the sale of Common Stock
pursuant to options granted hereunder shall constitute general funds of the
Company.
EXHIBIT 10(f)
ACXIOM CORPORATION
U.K. SHARE OPTION SCHEME
Approved by the Board of
Inland Revenue under
Finance Act 1984
Adopted on November 18, 1987
under reference x2945
Incorporating amendments made by the Board
on 17th December 1990, on 8th March, 1993
26th May 1993, and 24th May 1995
ACXIOM CORPORATION
U.K. SHARE OPTION SCHEME
A. DEFINITIONS
In this Scheme references to the following words and expressions shall
bear the following meanings, namely:
"Associated Company" - Has the same meaning as in Section 302 of the
Income and Corporation Taxes Act 1970.
"Adoption Date" - The date on which the Scheme is adopted by Resolution
of the Board.
"the Annual Salary" - The emoluments of the office or employment of a
Qualified Person by virtue of which he is a Qualified Person as are liable to be
paid under deduction of tax pursuant to Section 204 of the Income and
Corporation Taxes Act 1970 (after deducting from such emoluments amounts
included by virtue of Chapter II of Part III of the Finance Act 1976) for the
current or preceding year of assessment (as defined in Section 526(5) of the
Taxes Act 1970) whichever is the higher or if no such emoluments were paid
during the preceding year of assessment then it shall be the emoluments of the
office or employment of such Qualified Person liable to be so paid for the
twelve month period beginning with the first date on which payment of such
emoluments is made during the current year of assessment. If such emoluments, or
any part thereof, are payable in a currency other than sterling, the sterling
equivalent shall be calculated by reference to the average of the buy and sell
exchange rates for such currency quoted by the Wall Street Journal on the
business day preceding the date of grant.
"the Board" - The Board of Directors of the Company.
"the Committee" - A duly constituted committee of the Board consisting
of not less than two persons, each of whom is a "disinterested person" within
the meaning of Rule 16b-3 of the Securities Exchange Act of the United States of
America of 1934, as amended.
"the Company" - Acxiom Corporation.
"First Exercise Date" - The date or dates specified in the relevant
Option Certificate being not earlier than one year and not later than nine and a
half years from the date of grant.
"the Group" - The Company and all of its Subsidiaries for the time
being or (where the context so requires) the Company and/or any of its
Subsidiaries.
"Market Value" - The price of a Share on the date of grant of an Option
determined in accordance with Part VIII of the Capital Gains Tax Act 1979 as
agreed in advance for the purposes of the Scheme with the Board of Inland
Revenue.
"Material Interest" - An interest in the Company or another company on
any date or within the preceding twelve months determined in accordance with the
provisions of paragraphs 4(1)(b) and 4(4) of Schedule 10 of the Finance Act
1984.
"Option" - A right to subscribe for or acquire Option Shares granted
pursuant to the Scheme.
"Option Certificate" - The Option Certificate substantially in the form
set out in the Appendix as may be amended by the Board from time to time.
"Option Holder" - A Qualified Person or a former Qualified Person who
holds an Option in accordance with the terms of the Scheme or where the context
permits a person becoming entitled to any such Option in consequence of the
death of the original Option Holder.
"Option Period" - A period commencing at the First Exercise Date and
ending at the date resolved upon by the Committee and specified in the relevant
option certificate being the period within which (subject to the provisions
hereof) the Options granted hereunder must be exercised if at all provided that
such period must end not later than ten years from the date of grant of the
Option.
"Option Shares" - Unissued or issued Shares in respect of which Options
are granted.
"Shares" - Shares of Common Stock of $0.10 par value each in the
capital of the Company which comply with the provisions of paragraphs 7 to 11 of
Schedule 10 of the Finance Act 1984.
"Qualified Person" - Any full-time director of a company in the Group
who is required by the terms of his employment or office to work for the Group
or any part of it for 25 hours or more per week (exclusive of meal breaks) or a
full-time employee of the Group (other than one who is also a director of a
company in the Group) who is required by the terms of his employment to work for
the Group or any part of it for 20 hours or more per week (exclusive of meal
breaks).
"the Scheme" - This Acxiom Corporation U.K. Share Option Scheme in its
present form with and subject to any amendments thereto properly effected.
"Subscription Price" - The amount payable for Option Shares on the
exercise of an Option granted hereunder, and to be determined in accordance with
paragraph D below.
"Subsidiary" - A company the majority of whose issued share capital is
owned directly or indirectly by the Company.
Except so far as the context otherwise requires any reference herein to
any enactment shall be construed as a reference to that enactment as for the
time being amended, extended or re-enacted. References to the exercise of an
Option shall where the context so allows include the exercise of an Option in
part. The masculine gender shall include the feminine gender. The singular shall
include the plural.
B. GRANT OF OPTIONS
(1) The Committee may at its discretion grant by resolution Options to
any Qualified Persons subject to the terms set out in the Scheme in respect of
the number of Shares that the Committee shall decide and (if the Committee so
resolves in any particular case) subject to achievement of profit or other
performance criteria that have been previously agreed with the Board of Inland
Revenue.
(2) No Options shall be granted to any Qualified Person who has a
Material Interest.
(3) As soon as practicable after the grant of Options the Committee
shall arrange for the despatch of an Option Certificate to each Option Holder to
whom an Option has been granted.
(4) Each Option Certificate shall specify:
(a) the number of Shares over which the Option is granted;
(b) the Subscription Price for each Share;
(c) the First Exercise Date;
(d) the date on which the Option Period will end;
(e) (if the Committee resolves) the profit or other
performance criteria to be attained; and
(f) the date of grant.
(5) The Committee shall report to the Board the names of Qualified
Persons granted options, the number of shares covered by each option, the date
of grant and the terms and conditions of each such option.
C. SUBSCRIPTION PRICE
Subject to adjustment pursuant to Rule G, the Subscription Price for
each Share in respect of which an Option is exercisable shall be not less than
the higher of the Market Value and the par value of a Share.
D. LIMITATION
(1) An Option shall not be granted to a Qualified Person if the
aggregate subscription price for:-
(i) the Option Shares to be subject to the Option; and
(ii) all shares under option or acquired on the exercise
of an option by the Qualified Person pursuant to the
Scheme or any other scheme approved under Schedule 10
to the Finance Act 1984 which is established by the
Company or any Associated Company
would exceed the greater of four times his Annual Salary and
(pound)100,000.
(2) For the purposes of sub-rule (1) above the exchange rate of pounds
sterling to U.S. dollars on any day shall be taken as the average of the buy and
sell exchange rates quoted by the Wall Street Journal on the business day
preceding the date of grant.
E. EXERCISE AND LAPSE OF OPTIONS
(1) Subject to (2) below, the Option is not to be exercisable
unless:-
(i) at the date of exercise the Option Holder is a
Qualified Person; and
(ii) the Option Period has commenced and not expired but
so that the Option shall not in any event be
exercisable more than ten years after the date of
grant of the Option and shall lapse if not exercised
during the Option Period.
(2) The Option shall, in the following circumstances but subject to the
provisions of this Rule E, be exercisable earlier or otherwise than as
aforesaid:
(i) if the Option Holder ceases to be a Qualified Person
before the commencement of the Option Period or (if
the Option Period shall have commenced) while an
Option Period is current: by reason of injury,
disability or redundancy (within the meaning of the
Employment Protection (Consolidation) Act 1978) or by
reason of retirement on reaching pensionable age
within the meaning of Schedule 20 to the Social
Security Act 1975 or any other age at which he is
bound to retire in accordance with the terms of his
contract of employment whereupon the Option may be
exercised until the expiry of the latest of:
(a) six months of his so ceasing;
(b) three years and six months after the date of
Grant of the Option; and
(c) three years and six months after the date
(prior to cessation) that the Option Holder
last exercised an option in circumstances in
which paragraphs (a) and (b) of sub-section
3 of Section 38 of Finance Act 1984 apply
and thereafter the Option shall lapse;
(d) in relation to options granted on or after
23rd January, 1991 such greater period as
the Board in its absolute discretion shall
allow; and in relation to options granted on
or after 23rd January, 1991 if he so ceases
for any other reason at any time, the Option
may not be exercised at all unless the Board
shall so permit, in which event it may (and
subject to (ii) below must, if at all), be
exercised to the extent permitted by the
Board within the period mentioned herein.
(ii) if the Option Holder dies before the commencement of
the Option Period while still being a Qualified
Person or (if the Option Period shall have commenced)
while an Option Period is current whereupon the
Option may be exercised within twelve months of his
death by his legal personal representatives and
thereafter the Option shall lapse;
(iii) if the Option Holder ceases to hold the office or
employment by virtue of which he is a Qualified
Person while still being a Qualified Person at any
time on or after the First Exercise Date for any
reason other than those set out in sub-clause E(2)(i)
and the Board resolves that the Option should become
exercisable whereupon the Option may be exercised
within 90 days of him so ceasing (unless the Board in
its absolute discretion allows some greater period)
and thereafter the Option shall lapse;
(iv) In the event that notice is duly given to the
stockholders of the Company of a proposal to merge,
amalgamate, or otherwise reconstruct the capital of
the Company or to dissolve or wind-up the Company or
in the event an offer to purchase the Shares shall be
made to the holders of Shares generally (where any
person obtains control of the Company as a result)
then the Option Holders may exercise the Option
immediately prior to:-
(i) such merger; amalgamation or reconstruction;
or
(ii) the commencement of such dissolution or
winding-up; or
(iii) the lapse of an offer to purchase shares by
virtue of which a person obtains control of
the Company
(v) for the purposes of the foregoing sub-clause (iv) a
person shall be deemed to have obtained control of
the Company if he and others acting in concert with
him have together obtained control of it.
(3) Each period referred to in Rule E (2) shall in any event end
not later than ten years from the date of grant of the Option.
(4) Any Option that is exercisable on the attainment of a performance
target specified pursuant to Rule B(4) shall lapse (if and to the extent not
waived by the Committee with the prior approval of the Board of Inland Revenue)
if such performance target has not been attained.
(5) No Option is to be exercised if the Option Holder has a Material
Interest
(6) Exercise of an Option is to be by application in writing addressed
to the Company and specifying the number of Option Shares in respect of which
the Option is being exercised on that occasion and accompanied by payment in
full of the Subscription Price for such Option Shares, such application to be
delivered or sent by prepaid post to the registered office for the time being of
the Company or to such office as may from time to time be specified.
(7) Subject to such consents of the Bank of England, H.M. Treasury or
other competent authority under the regulations or enactments for the time being
in force as may be necessary and subject to compliance by the Option Holder with
the terms of the Option the Company will not later than twenty-eight days after
receipt of the application make an allotment or transfer to the Option Holder of
the number of Shares specified in the application at the Subscription Price (as
adjusted in accordance with the provisions of the Scheme) and will deliver to
the Option Holder definitive Share Certificates in respect thereof.
F. SUBSTITUTION OF OPTION SHARES
(1) Notwithstanding the provisions of sub-rule E(2)(iv) hereof if any
company (hereinafter called the "acquiring company") shall obtain control of the
new Company as a result of making:
(a) A general offer to acquire the whole of the issued share
capital of the company which offer is made on a condition that
if the condition is satisfied the acquiring company will have
control of the Company; or
(b) A general offer to acquire all shares of the Company which are
of the same class as the Option Shares;
any Option Holder may at any time within the appropriate period (as defined in
sub-clause (2) below) by agreement with the acquiring company release his rights
under the Scheme (hereinafter called "the old rights") in consideration of the
grant to him of rights (hereinafter called "the new rights") which are
equivalent (as defined in sub-clause (3) below) to the old rights but relate to
shares in a company other than the Company (being either the acquiring company
or some other company within the provisions of paragraph 7(b) or (c) of Schedule
10 to the Finance Act 1984).
(2) For the purposes of sub-rule F(1) above the appropriate period
means a period of 90 days beginning with the time when the acquiring company has
obtained control of the Company and (if applicable) any condition subject to
which the offer is made is satisfied.
(3) For the purposes of sub-rule (1) above the new rights shall be
equivalent to the old rights if the requirements of paragraph 4A(3)(a) to (d)
inclusive of the said Schedule 10 are met.
G. VARIATION IN THE SHARE CAPITAL OF THE COMPANY
On any variation of the Share Capital of the Company (whether by way of
capitalization or rights issue, sub-division or consolidation of the Shares or a
share capital reduction) the Subscription Price and/or the number of Shares
comprised in an Option shall be varied in such manner as the Committee shall
determine and such decision of the Committee shall be final and binding on the
Option Holders and the Company with notification being given in writing to the
Option Holders PROVIDED ALWAYS THAT:
(i) no adjustment to the Subscription Price shall be made pursuant
to the provisions of this sub-paragraph which would result in
any Option Shares being issued unlawfully at a discount and if
in the case of any such Option Shares such an adjustment would
but for this proviso have so resulted the Subscription Price
payable for such Option Shares shall be the par value thereof;
(ii) no variation to the number of Shares comprised in an Option or
the Subscription Price thereof shall be made pursuant to any
of the provisions contained in this sub-paragraph until the
Board of Inland Revenue have approved such variation.
H. RIGHTS OF ORDINARY SHARES ALLOTTED
Shares to be allotted pursuant to the exercise of any Option shall rank
pari passu in all respects and as one class with the Shares in issue at the date
of allotment but shall not rank for dividends for which the record date precedes
the date of exercise of the Option.
I. AVAILABILITY OF SHARES
The Company shall at all times have available sufficient unissued
Shares to meet any exercise of any Option. The maximum number of Shares which
may be issued on the exercise of Options granted under the Scheme shall be
800,000.
J. TRANSFER OF OPTIONS
(1) No Option granted pursuant to this Scheme nor the benefit thereof
may be transferred assigned charged or otherwise alienated.
(2) If an Option Holder does or suffers an act or thing whereby he
would or might be deprived of the legal or beneficial ownership of an Option
that Option shall forthwith lapse and the Board shall not knowingly permit its
exercise.
K. LOSS OF OFFICE
If any Option Holder shall cease to be a Qualified Person for any
reason he shall not be entitled by way of compensation for loss of office or
(save as otherwise provided herein) otherwise however to any sum or other
benefit to compensate him for the loss of any right under the Scheme.
L. THE ADMINISTRATION OF AND AMENDMENTS TO SCHEME
(1) The Board may amend any of the provisions of the Scheme in any
way it thinks fit save that:
(i) no alteration shall be effective to abrogate or alter
adversely any of the subsisting rights of Option Holders
except with such consent or sanction on the part of the Option
Holders as would be required under the provisions of the
Company's Restated Certificate of Incorporation as if the
Option Shares constituted a single class of shares and as if
such provisions applied mutatis mutandis thereto.
(ii) no amendment made while the Scheme continues to have the
approval of the Board of Inland Revenue shall be effective
until approved by the Board of Inland Revenue.
(2) The decision of the Committee shall be final and binding in all
matters relating to the Scheme and it may at any time discontinue the grant of
further Options or decide in any year not to grant any Options.
(3) The Committee shall have the power from time to time to make and
vary such regulations (not being inconsistent with the Scheme) for the
implementation and administration of the Scheme as it may think fit and its
decision on any matter relating to the interpretation of the Rule of the Scheme
or any other matter concerning the Scheme shall be final and binding (save as
expressly stated otherwise).
(4) The Scheme shall be administered by the Committee. The Board may
from time to time remove members from, or add members to, the Committee.
Vacancies on the Committee, howsoever caused, shall be filled by the Board.
Members of the Committee shall not be eligible to receive options under the
Scheme. The Committee shall select one of its members as chairman and shall hold
meetings at such times and places as it may determine. A majority of the
Committee shall constitute a quorum and acts of the Committee at which a quorum
is present, or acts reduced to or approved in writing by all the members of the
Committee, shall be the valid acts of the Committee.
EXHIBIT 10(h)
GENERAL DESCRIPTION OF THE FISCAL 1997 EXECUTIVE COMPENSATION PLAN
OBJECTIVE:
. The objective of the Fiscal 1997 executive incentive plan is to implement a
compensation program which will reflect the executive's responsibility,
provide compensation that is both equitable and competitive, and which
will:
Align the executive's interests with shareholder/investor's interest.
Motivate executives to achieve the highest level of performance.
Retain key executives by linking executive compensation to company
performance.
Attract the best executives through competitive, growth-oriented plans.
Enable sharing of growth & success between associates/executives and
shareholders.
General
Eligibility of participants:
. For purposes of the executive compensation plan, eligible associates will
include members of the Acxiom Executive Team (i.e. EOT members, Corporate
executives, business unit executives and business development executives.)
. For purposes of determination of "at risk" pay, eligible associates must be
employed at the end of the fiscal quarter to receive payment for that
quarter's payment. The "at risk" pay for eligible associates who joined the
Executive Team after the beginning of the quarter will be pro-rated.
. For payment of the annual portion of "at risk" pay, eligible associates
must be employed at the end of the fiscal year to receive payment for that
year's payment. The "at risk" pay for eligible associates who joined the
Executive Team after the beginning of the fiscal year will be pro-rated.
. For purposes of determination of the long-term incentive (LTI), eligible
associates must be employed and be a member of the Executive Team on the
date the Board of Directors reviews the LTI grants for that year. There is
no provision for prorating partial years. These options fall under the
Acxiom stock option plan and will be subject to all standard provisions.
. The determination of the "at risk" is made based on the eligible
associate's base salary as of April 1, 1996, uplifted by 8% to compensate
for salary increases during the year (pro-rated based on review date.)
Components:
. The components of the fiscal 1997 compensation plan together with their
relative weightings are:
CORP. BUE/
EOT TEAM BDE
Base salary (not at risk) 40% 50% 60%
Base salary (at risk target) 25% 25% 20%
Long Term Incentive 35% 25% 20%
--- --- ---
100% 100% 100%
At-Risk Component
The at-risk pay will be based on the change in EVA attained with two EPS gates.
Gate 1 is for the beginning of Initial Funding of Incentives and Gate 2 is for
the full funding of incentives at target levels. The theory (Stern Stewart also
developed the EVA concept) and the rationale for this plan were developed by
Stern Stewart Inc. and are summarized below.
. Maximizing EVA is the key to maximizing shareholder value:
. Maximizing other measures (e.g., earnings, returns, cash flow) doesn't
necessarily maximize value. EVA has the best correlation with shareholder
value (empirical studies)
EVA Incentive Principles
. Target Incentive
Competitive total compensation opportunity
. Expected EVA Improvement
Performance standard to achieve "Target"
. Sharing of EVA Improvement Above/Below Expected
Associates and shareholders share risks and rewards
. Incentive Bank
Cumulative performance and incentive linked
What is Expected EVA Improvement?
. Positive EVA leads to positive value-added (premium to book value)
. EVA improvement results in growth in value-added
. Market values typically include an expectation of EVA improvement
. Investor expectations are attained by meeting expected EVA improvement
Target Incentives and Expected EVA Improvement
. Achievement of Expected EVA Improvement results in Target Incentive Pool.
. Expected EVA Improvement is based on Acxiom's market value and investor
expectations.
. Target Incentive Pool provides competitive cash compensation.
Sharing of Incremental EVA Results
. Sharing of incremental EVA (above/below "Expected") is constant
. * 50% of every $1 of EVA above expected is added to incentive pool.
* 50% of every $1 of EVA below expected is subtracted from incentive
pool (EVA improvement can be below zero.)
. Associates/executives share in all risks and rewards (no caps or floors)
. Incentive cost is about 5.5% of incremental NPV of shareholder gains
Incentive Bank Principles
. Incentive Pool for current year "deposited" into incentive bank
. Bank balance distributed:
* 100% up to "target" incentive
* 33% above "target" incentive
. Remaining bank balance reserved against future performance
. "Negative" bank balance "repaid" before future incentives are paid
Incentive Funding (EPS Gates)
. Incentive attainment determined based on EVA achievement
. Incentive funding subject to pro rata reduction if EPS Gates are not
achieved (includes Cust. and Assoc. Satisfaction.)
. Bank "deposits" equal to Incentive Attained Times Funding Factor. (Funding
factor equals Incentives funded divided by Incentives Attained.)
. Existing bank balances also subject to forfeiture to satisfy EPS Gates.
"At Risk" Target Opportunity
Financial
Common Fate Company EVA (2) 25%
Group/Unit Performance EVA (3) 55%
Customer Satisfaction (4) 10%
Associate Satisfaction (5) 10%
Subject to the Funding Gate Based on Corporate EPS (1)
Revenue Groups/Units:
The business group and unit EVA is the controllable EVA for a revenue business
group/unit which includes the direct revenue and expenses for the unit less
appropriate charges for data center consumption, application software and
facilities as determined by the ABM system. Also included will be a charge for
the cost of capital including accounts receivable, data center equipment,
workstation/LAN and facilities. The target for your business unit EVA will be
negotiated with your EOT member.
Support Groups/Units:
Product Line EVA is determined through the ABM report which accumulates revenue
and expenses by product line less a charge for the data center cost of capital.
The product line EVA contribution percentage will be to improve the product line
EVA as a percentage of revenue from the prior year. Specific targets will
reflect product lines which your business unit is most closely aligned with as
negotiated with your EOT member.
The business plan target component (for support units) is to maintain your
expenses at or below your fiscal 1997 business plan.
(1) EPS Gate Calculation
The EPS target for fiscal 1997 is $.95 per share including the
acquisitions of Pro CD and DMI which were effective April 1. All "at
risk" payments are subject to first achieving Acxiom's EPS targets.
There are two gates. The first gate is a gate to begin initial funding
of the incentive plans. The second gate is for full funding of the
incentive plans at target. The funding calculation is as follows:
Gate 1 - Corporate Gate for Initial Funding of Incentives (equals 25% EPS
Growth) - $.88 for FY `97
. 25% of all earnings above $.88/share will be added to the Incentive
Fund (This will generate approximately $1,000 million in funding @
$.95/EPS)
Gate 2 - Corporate Gate for full funding of Incentives - $.95/EPS
. 100% of all earnings above $.95/share will be added to the Incentive
Fund until the Target Incentives have been funded (estimated to be
approximately $5,500,000 for FY `97.)
Over Achievement
. Above the Funding & EVA Targets, 50% of all Incremental EVA will be
added to Incentive Funding with no gate calculation. Above target funds
will be added to the respective incentive banks and 1/3 will be paid at
the end of the fiscal year and 2/3 will be banked for future payment
(subject to the sustained business performance of Acxiom Corporation.)
. The over achievement EVA will be funded at the corporate level and
distributed to the Business Groups/Units that overachieved their
respective EVA targets.
(2) Financial - common fate - This component is based on "Acxiom EVA" as
indicated together with the percentage of at-risk assigned on the
attached table. When the common fate target is "Acxiom EVA", the
calculation will represent the total EVA for Acxiom Corporation.
(3) Financial - group/unit performance - This component is based on either
"Group EVA", "Unit EVA", "improvement in product EVA" or the "Business
Plan". Group EVA is the sum of the revenue business unit EVA's
reporting to same EOT member.
(4) Customer and Quality Performance Measures - The objective of the
customer satisfaction/quality initiative is to establish consistent
direction without having regulated practices. The long-term objective
is to have a total customer satisfaction process in each business unit.
By March 31, 1997, the following goals must be met.
A. All associates in the business unit should continue to gain a
thorough understanding of the customer satisfaction process
standards.
B. The business unit must conduct an assessment of their practices
against these standards.
C. The business unit must select an area where improvement is
needed based on the result of the assessment and make an
improvement in their customer satisfaction process.
D. The business unit must document and publish the results of the
specific customer improvement effort.
The result should be to replace less effective practices with more
effective practices.
(5) Associate Satisfaction Measures
A. The annual associate survey results must be communicated to
all associates in the business unit. Each business unit should
identify the area(s) of primary concern to be addressed by the
business unit. Any corporate issues should be forwarded to
your Human Resources Representative but not included as one of
the BU top three issues.
B. Each business unit should develop action plans for the top
three issues identified in the survey feedback process and
begin implementation of the action plans.
C. Each business unit should establish measurements for these
action plans and a communication process to all business unit
associates about the progress.
D. The Business Unit Human Resources Representative should review
and verify completion of A, B and C above by signing off on
the gainsharing assessment documentation.
Method of payment:
. Payments will be made on a quarterly basis based on attainment of financial
objectives up to your target incentive and subject to the EPS funding gate
calculation, as follows:
First Quarter - 1/8th of total opportunity (Subject to EPS Funding Gate 2)
Second Quarter - 1/8th of total opportunity (Subject to EPS Funding Gate 2)
Third Quarter - 1/8th of total opportunity (Subject to EPS Funding Gate 2)
Fourth Quarter - 5/8th of total opportunity (1/8 for the 4th Quarter & 1/2
for the Annual Target and subject to EPS Funding Gates 1 and 2.)
. All over achievement incentives will be deferred until the year end
payment.
. All payments will be made within 60 days of the end of the quarter.
. All EVA and EPS gate calculations will be done on a year-to-date basis.
For the first, second and third quarters, the objectives are equal to the
Year-to-date financial targets as of the end of each respective quarter and are
subject to the EPS gate calculation. The total Company EVA and EPS quarterly
gate targets are shown below.
EVA EVA
(in 000's) EPS (in 000's) EPS
First Quarter Third Quarter
$541 $.15 $3,253 $.30
Second Quarter Fourth Quarter
$1,346 $.22 $2,434 $.28
------ ----
TOTALS $7,574 $.95
====== ====
. The Incentives for Associate Satisfaction and Customer and Quality
Measures will be payable at year end if achieved and funded through the EPS
Gate calculation.
Long-Term Incentive
. The long-term incentive will be in the form of stock options and other
performance vehicles as necessary. The initial vehicle will be stock
options.
. Stock options will be awarded under three categories:
Category A - Fair market value at date of grant Category B - 50% above
fair market value Category C - 100% above fair market value
. Using the Black-Scholes stock options pricing model, the mix of options to
be awarded as an approximate percentage of the total long-term incentive
are:
Category A - 25% of total long-term incentive Category B - 25% of total
long-term incentive Category C - 50% of total long-term incentive
. Under the long-term incentive plan, participants will be awarded a grant of
stock options annually.
. Stock options awarded will vest equally on each of the nine anniversary
dates following the date of grant. Stock options may not be exercisable
later than ten years after their date of grant.
. The fiscal 1997 stock options were officially approved and priced by the
Board of Directors in January, 1996. The number of stock options were
determined based on your base salary as of 1/1/96, uplifted by 8% to
compensate for salary increases during the year (pro-rated based on review
date.)
. It is the current intent of the Board of Directors to continue this plan
(or a similar plan) in future years. The Board of Directors reserves the
right to modify or cancel this plan in future years for any reason at its
sole discretion.
EXHIBIT 10(i)
ACXIOM CORPORATION
NON-QUALIFIED DEFERRED COMPENSATION PLAN
Effective
December 1, 1995
ACXIOM CORPORATION
NON-QUALIFIED DEFERRED COMPENSATION PLAN
Table of Contents
ARTICLE 1 PURPOSE, DEFINITIONS AND CONSTRUCTION
1.1 Purpose of the Plan
1.2 Definitions
1.3 Construction
ARTICLE 2 ELIGIBILITY
2.1 Eligibility Requirements
ARTICLE 3 CONTRIBUTIONS TO THE PLAN
3.1 Participant Contributions
3.2 Employer Mandatory Matching Contribution
3.3 Employer Discretionary Matching Contribution
3.4 Employer Non-Matching Contributions
3.5 Establishing of Account
ARTICLE 4 ALLOCATION AND INVESTMENT
4.1 Allocation
4.2 Establishment of Trust
4.3 Allocation of Investment Earnings
ARTICLE 5 DETERMINATION OF PAYMENT OF ACCOUNT
5.1 Vesting of Account
5.2 Determination of Account
5.3 Timing of Payment
5.4 Form of Payment
ARTICLE 6 MISCELLANEOUS
6.1 Administration of the Plan
6.2 Amendment of the Plan
6.3 Termination of the Plan
6.4 Notices to Participants
6.5 Non-Alienation
6.6 Arbitration
6.7 Law Governing
6.8 Validity
6.9 Status of Participants
6.10 Effect on Successors in Interest
ARTICLE 1
PURPOSE, DEFINITIONS AND CONSTRUCTION
1.1 Purpose of the Plan
This Plan is established by the Employer to permit certain select
management employees, who are defined below, to defer the payment of a
percentage of their Compensation, and in addition thereto, to provide for
certain Employer contributions to augment such employees' retirement income in
addition to what is provided for under the tax qualified plans of the Employer.
This Plan is not intended to, and does not, qualify under Sections 401(a) and
501(a) of the Internal Revenue Code of 1986, as amended, and is designed to be a
"top hat" plan under Section 201(2) of the Employee Retirement Income Security
Act of 1974.
1.2 Definitions
The following terms, when found in the Plan, shall have the meanings
set forth below:
(a) Account: All amounts credited under the terms of the Plan to
to a Participant, the rights to which are determined under the Plan.
(b) Account Balance: At any time, the total of all amounts credited
under the terms of the Plan to a Participant, the rights to which are determined
under the Plan.
(c) Beneficiary: The person(s) and/or the trust(s) created for the
benefit of a person or persons who are the natural object of the Participant's
bounty, or the Participant's estate, whichever is designated by the Participant
to receive the benefits payable hereunder upon his death.
(d) Code: The Internal Revenue Code of 1986, as it may be amended
from time to time, including any successor.
(e) Compensation: Compensation shall be the total cash remuneration
paid by the Employer during each Plan Year, as reported on Form W-2 or its
subsequent equivalent, including bonuses, fees, commissions, amounts deferred
under Code Section 401(k) and 125, and amounts deferred under any other
non-qualified program of salary reduction. Compensation hereunder shall not be
subject to any limitations applicable to tax qualified plans, such as pursuant
to Code Sections 401(a)(17) or 415.
(f) Disability: A physical or mental condition of a Participant
resulting from bodily injury, disease or mental disorder which renders him
incapable of continuing his usual and customary employment with the Employer.
The determination of Disability shall be made by a licensed physician chosen by
the Employer.
(g) Effective Date: December 1, 1995.
(h) Eligible Employee: A person employed by the Employer or by any
member of a "controlled group" (as defined in Code Section 414(b)) or any entity
under "common control" (as defined in Code Section 414(c)) with the Employer in
the position of Vice President or above, or a person who has been designated by
the President of the Employer, by name, position, or in any other manner, as
being in the class of persons who are eligible to participate in the Plan. Such
latter designation shall be made in writing by the President of the Employer.
However, no person who is an employee of the Employer shall be selected as an
Eligible Employee except a member of the select group of management or highly
compensated employees of the
Employer, as such term is defined under Section 201 of the Employee Retirement
Income Security Act of 1974 ("ERISA"), and regulations and rulings promulgated
thereunder by the Department of Labor.
(i) Employer: Acxiom Corporation, a corporation organized and
existing under the laws of the State of Delaware, and any successor or
successors.
(j) Normal Retirement Age: The date on which a Participant attains
age sixty-five (65).
(k) Normal Retirement Date: The first day of the month coincident
with or next following a Participant's Normal Retirement Age.
(l) Participant: An Eligible Employee who has met the requirements
of Section 2.1 hereof, and whose participation has not been terminated.
(m) Plan: The Acxiom Corporation Non-Qualified Deferred Compensation
Plan, as set forth herein, and as it may be amended from time to time.
(n) Plan Year: The twelve month period beginning on January 1 and
ending on December 31 each year.
(o) Service: The period of a Participant's employment considered in the
calculation of the vested amount of his benefits. A Participant's Service shall
be determined in twelve (12) month periods, commencing with the twelve (12)
month period that begins on his date of hire with the Employer, and thereafter
based on Plan Years, including the Plan Year within which falls his date of
hire. During such twelve (12) month periods, a Year of Service will be granted
if the Participant completes at least one thousand (1,000) Hours of Service. An
Hour of Service is each hour for the Participant is paid by virtue of his
employment with the Employer, including hours paid but not worked (other than
hours for which payment is made or due under any plan maintained solely for the
purpose of complying with applicable worker's compensation, unemployment
compensation or disability insurance laws), and including hours completed prior
to the date he actually becomes a Participant hereunder.
(p) Trust: The irrevocable trust agreement executed by the Employer in
connection with this Plan which shall hold the amounts contributed to this Plan,
and which shall provide that its assets shall be subject to the claims of the
Employer's creditors.
1.3 Construction
The masculine gender, where appearing in the Plan, shall be deemed to
include the feminine gender, and the singular may indicate the plural, unless
the context clearly indicates the contrary. The words "hereof," "herein,"
"hereunder" and other similar compounds of the word "here" shall, unless
otherwise specifically stated, mean and refer to the entire Plan, not to any
particular provision or Section. Article and Section headings are included for
convenience of reference and are not intended to add to, or subtract form, the
terms of the Plan.
ARTICLE 2
ELIGIBILITY
2.1 Eligibility Requirements
An Eligible Employee shall become a Participant hereunder as of the
first January 1 which is coincident with or next follows his commencement of
employment. Provided, however, each person who is an Eligible Employee as of
December 1, 1995, shall become a Participant as of such date, regardless of his
employment date.
ARTICLE 3
CONTRIBUTIONS TO THE PLAN
3.1 Participant Contributions
Each Participant shall make a written election to reduce his
Compensation otherwise to be paid to him in cash, which election must be made
prior to the first day of the Plan Year to which the election relates (or, with
respect to the Plan Year ending on December 31, 1995, prior to the date of
rendering services for which such Compensation is being paid, as long as the
election is made by December 30, 1995). The Employer shall contribute to the
Trust the amounts reduced from the Participants' Compensation ("Salary Reduction
Contributions"), less an amount withheld for purposes of satisfying Code Section
3121, as soon as administratively feasible after the amounts would otherwise
have been paid to the Participants; provided, however, that the Participants
shall have no preferred claim in or any beneficial ownership in any assets of
the Trust. Participants may elect to reduce their Compensation in whole
percentages up to 15% of Compensation for the Plan Year; provided, however, that
the Employer may reduce the maximum percentage of Compensation that can be
deferred for future Plan Years by an announcement in writing to all applicable
Participants prior to the first day of the Plan Year for which the reduced limit
is effective. Any election made under the terms of this Section 3.1 shall be
irrevocable for the Plan Year for which it is made. All elections shall remain
in effect for all future Plan Years in which the Participant remains an Eligible
Employee; however, the election may be amended or revoked as of the first day of
any subsequent Plan Year if such amendment or revocation is executed prior to
the first day of the Plan Year.
3.2 Employer Mandatory Matching Contribution
The Employer shall make an Employer Mandatory Matching Contribution
each Plan Year equal to (a) less (b), where:
(a) is fifty percent (50%) of the Participant's Salary Reduction
Contributions made under this Plan and the Acxiom Corporation Retirement Savings
Plan, combined, which Employer Mandatory Matching contribution is limited to an
amount equal to no more than three percent (3%) of the Participant's
Compensation, and
(b) is the amount allocated for such period as an Employer Matching
Contribution under the Acxiom Corporation Retirement Savings Plan.
3.3 Employer Discretionary Matching Contribution
The Employer may make an additional matching contribution each Plan
Year, to be known as an Employer Discretionary Matching Contribution, equal to
(a) less (b) and (c), where:
(a) is fifty percent (50%) of the Participant's Salary Reduction
Contributions made under this Plan and the Acxiom Corporation Retirement Savings
Plan, combined, which Employer Discretionary Matching Contribution is limited to
an amount equal to no more than six percent (6%) of the Participant's
Compensation, and
(b) is the amount allocated for such period as an Employer Matching
Contribution under the Acxiom Corporation Retirement Savings Plan, and
(c) is the amount allocated for such period as an Employer Mandatory
Matching Contribution under this Plan.
The determination as to whether an Employer Discretionary Matching
Contribution shall be made is in the sole discretion of the Board of Directors
of the Employer, determined on an annual basis.
3.4 Employer Non-Matching Contributions
The Employer may make an Employer Non-Matching Contribution each Plan
Year equal to a percentage of each Participant's Compensation as determined by
the Board of Directors of the Employer each Plan Year.
The determination as to whether an Employer Non-Matching Contribution
shall be made is in the sole discretion of the Board of Directors of the
Employer, determined on an annual basis.
3.5 Establishing of Account
Each Participant herein shall have maintained in his name an Account,
to which shall be credited his Salary Reduction Contributions, as well as his
allocable share of Employer contributions made under the terms of this Article.
A Participant's Account shall reflect his share of such contributions, including
his allocable share of any gains and losses pursuant to Section 5.4 hereof.
ARTICLE 4
ALLOCATION AND INVESTMENT
4.1 Allocation
Contributions made pursuant to Section 3.1 hereof shall be allocated to
the Account of the Participant from whose Compensation such amounts were
reduced.
Any contribution made pursuant to Sections 3.2, 3.3 and 3.4 hereof
shall be allocated to each Participant who is an Eligible Employee as of the
last day of the Plan Year for which such contribution was made, except that a
Participant need not be an Eligible Employee on the last day in order to receive
such an allocation if that Participant terminated employment during the Plan
Year as a result of his death, Disability, attainment of Normal Retirement Age,
or such other cause as shall be deemed as acceptable by the Board of Directors
of the Employer.
4.2 Establishment of Trust
The Employer shall establish the Trust with regard to the Accounts
hereunder, designed to be an irrevocable grantor trust under Code Section 671.
4.3 Allocation of Investment Earnings
Assets contributed to the Trust shall be invested in the sole
discretion of the trustee of the Trust and Participants shall have no right to
direct the investment of assets in the Trust or in the Account.
However, Accounts shall be credited with earnings (the "Deemed
Earnings") equal to the amount that would have been earned had the Accounts been
invested in the investments as selected by the Participants from a menu of
investment options reasonably equivalent to the investments available under the
Acxiom Corporation Retirement Savings Plan. The Participants shall notify the
Company via such telephonic or other form of notification as shall be determined
by the Company as to how the Participants would invest the Accounts if
Participants could direct the investments. If no such deemed investments are
selected by the Participants, the Deemed Earnings shall be determined as if the
Accounts were invested in the default investment vehicle under the Acxiom
Corporation Retirement Savings Plan.
ARTICLE 5
DETERMINATION OF PAYMENT OF ACCOUNT
5.1 Vesting of Account
A Participant's right to receive payment from the Employer in an amount
equal to his Account derived from contributions made under Section 3.1 hereof,
plus the Deemed Earnings thereon, shall be one hundred percent (100%) vested and
non-forfeitable at all times.
As to all other Participants, and as to the amount of such a
Participant's Account other than that derived from contributions made pursuant
to Section 3.1 hereof, the Participant's right to receive payment from the
Employer equal to his Account shall become one hundred percent (100%) vested and
non-forfeitable in accordance with the following:
(a) Upon the termination of employment of a Participant at or after
his Normal Retirement Date.
(b) Upon a determination of Disability in accordance with Section
1.2(e) hereof.
(c) Upon the death of a Participant.
Prior to the occurrence of any of the foregoing, such Participant shall
become vested in his Account in according with the following schedule:
Years of Service
With the Employer Vested Percentage
1 0%
2 20%
3 40%
4 60%
5 80%
6 100%
5.2 Determination of Account
As of the date of a Participant's termination of employment with the
Employer (including termination due to any of the events specified under Section
5.1 hereof), his vested Account Balance shall be determined in accordance with
the provisions of Section 5.1 above. Thereafter, as of the last day of the Plan
Year coincident with or next following his termination of employment, the
non-vested portion of his Account shall be forfeited. Such forfeited amount
shall be reallocated among all Participants eligible to receive Employer
contributions as of such date under Section 4.1 hereof, in the proportion that
such Participant's Compensation for the Plan Year bears to the Compensation for
the Plan Year of all Participants eligible for such contribution.
5.3 Timing of Payment
A Participant, or in the case of a benefit due to the death of a
Participant, his Beneficiary, shall be entitled to payment of his vested Account
Balance immediately following the termination of his employment status with the
Employer.
Payment shall be made as soon as administratively feasible following
such event, based on the Participant's Account Balance of the last day of the
calendar quarter next preceding the date of distribution. However, if the
Employer determines that such payment would not be in the best interest of
remaining participants due to fluctuations in the value of the Trust, no
distribution shall be made until a subsequent value of the Trust is determined,
as of the last day of the calendar quarter in which the event requiring
distribution occurs.
Payment may be made earlier if the Employer in its discretion
determines that the Participant has a severe financial hardship caused by an
unforeseeable emergency beyond the Participant's control. The payment is limited
to the amount needed to meet the unforeseeable emergency. Unforeseeable
emergency shall mean severe financial hardship to the Participant resulting from
a sudden and unexpected illness or accident of the Participant or of a dependent
(an individual over half of whose support for the calendar year in which the
taxable year of the Participant begins was received, or is treated as received,
from the Participant under Code Section 152), loss of the Participant's property
due to casualty, or other similar circumstances arising as a result of events
beyond the control of the Participant.
5.4 Form of Payment
A Participant or Beneficiary entitled to payment shall receive, based
upon his irrevocable written election prior to actual commencement of payment,
either a single lump sum payment in cash, equal annual installment payments over
a period of years elected by the Participant, or an equivalent annuity. If an
annuity is elected, it shall be purchased from a commercial insurer, based upon
the single lump sum Account Balance that would otherwise be paid, net of all
costs of acquiring the annuity, in a form as available from such insurer, and
based on the applicable market rates at that time.
This election, however, shall be made upon the Participant's initial
entry into the Plan and shall be made in writing. If a Participant does not make
any such election by the end of the first Plan year in which he participates, he
shall be deemed to have elected to receive his Account Balance, when it becomes
due, in the form of a single lump sum payment. Via written election not to
become effective until the end of the Plan Year following the Plan Year in which
the election is made, the Participant may change his election of the form of
payment if the Participant has not terminated his employment and if the payments
under the Plan are not due and ascertainable in amount as of the date of the
election.
ARTICLE 6
MISCELLANEOUS
6.1 Administration of the Plan
The Plan shall be administered by the Employer. The books and records
of the Plan shall be maintained by the Employer at its expense, and no member of
the Board of Directors of the Employer, or any employee of the Employer acting
on its behalf, shall be liable to any person for any action taken or omitted in
connection with the administration of the Plan, unless attributable to his own
fraud or willful misconduct. The Employer in its capacity as administrator shall
have full discretion to determine eligibility for and amount and method of
payment of benefits and to construe any ambiguous or unclear provisions to the
Plan and all such decisions of the Employer shall be enforced unless the
decision is arbitrary or capricious.
6.2 Amendment of the Plan
The Plan may be amended, in whole or in part, from time-to-time, by the
Board of Directors of the Employer, without the consent of any other party.
6.3 Termination of the Plan
The Plan may be terminated, at any time, by action of the Board of
Directors, without the consent of any other party. The termination of this Plan
shall not result in the granting of any additional rights to any Participant,
such as, to the extent not funded, full vesting of his Account, except as
already provided under the terms of Section 5.1 hereof.
6.4 Notices to Participants
From time-to-time, the Employer shall provide a Participant with an
accounting of the value of his Account no less than the frequency provided under
the Acxiom Corporation Retirement Savings Plan. Further, a Participant will be
provided written notice of any amendment of the Plan that affects his rights
herein, and of the termination of the Plan.
6.5 Non-Alienation
To the extent permitted by law, the right of any Participant or
Beneficiary in any Account Balance hereunder shall not be subject in any manner
to attachment or other legal process for the debts of such Participant or
Beneficiary, and any such Account balance shall not be subject to anticipation,
alienation, sale, transfer, assignment or encumbrance.
6.6 Arbitration
Any dispute or controversy arising under or in connection with this
Plan shall be settled exclusively by arbitration in Faulkner County, Arkansas,
in accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any court having
jurisdiction. Each party shall bear his or its own costs of arbitration, but if
Employee is the prevailing party in such arbitration, he shall be entitled to
recover from Acxiom Corporation as party of any award entered his reasonable
expenses for attorneys' fees and disbursements.
6.7 Law Governing
This Plan shall be governed by and construed in accordance with the
laws of the State of Arkansas without giving effect to any principle of
conflict-of-laws that would require the application of the law of any other
jurisdiction.
6.8 Validity
The invalidity or unenforceability of any provision or provisions of
this Plan shall not affect the validity or enforceability of any other provision
of this Plan, which shall remain in full force and effect.
6.9 Status of Participants
Participants have the status of general unsecured creditors of the
Employer with respect to their rights under this Plan. This Plan constitutes a
mere unsecured promise by the Employer to pay benefits in the future. It is the
intention of the parties that the Plan be unfunded for tax purposes and for
Title I of ERISA.
6.10 Effect on Successors in Interest
This Plan shall inure to the benefit of and be binding upon the heirs,
administrators, executors and successors of each of the parties thereto.
IN WITNESS WHEREOF, and as conclusive evidence of the adoption of the foregoing
instrument comprising the Acxiom Corporation Non-Qualified Deferred Compensation
Plan, Acxiom Corporation, as the Employer, has caused its seal to be affixed
hereto and these presents to be duly executed in its name and behalf by its
proper officers thereunto authorized this 1st day of December, 1995.
ATTEST: ACXIOM CORPORATION
/s/ Catherine L. Hughes /s/ Rodger S. Kline
- ------------------------- ---------------------------
Secretary Name: Rodger S. Kline
Title: Chief Operating Officer
EXHIBIT 13
(This page and the following four (4) pages correspond to pages 21-25 of the
Company's Annual Report.)
Selected Financial Data
Years Ended March 31, 1996 1995 1994 1993 1992
Earnings Statement Data:
Revenue $ 269,902 202,448 151,669 115,827 90,905
Net Earnings 18,223 12,405 8,397 6,230 2,143
Earnings per share .70 .54 .38 .30 .11
Average shares
outstanding 26,039 22,943 21,840 20,768 19,056
======= ======= ======= ======= ======
March 31, 1996 1995 1994 1993 1992
Balance Sheet Data:
Current assets $ 54,014 43,517 35,857 36,027 29,902
Current liabilities 31,159 24,964 12,895 14,938 12,474
Total assets 194,049 148,170 123,378 112,841 87,380
Long-term debt,
excluding current
installments 26,885 18,219 34,992 33,237 22,994
Redeemable common
stock - - 7,692 7,222 -
Stockholders' equity 122,741 97,177 61,896 52,171 47,424
======= ======= ======= ======= ======
(In thousands, except per share data. Per share data are restated to two-for-
one stock splits in both fiscal 1995 and 1993.)
The following table is submitted in lieu of the required graphs:
YEAR 1992 1993 1994 1995 1996
Revenue (Dollars in
Millions) 90.9 115.8 151.7 202.4 269.9
Earnings Per Share
(In Dollars) .11 .30 .38 .54 .70
Stock Price (In
Dollars (At March 31)) 3.94 8.75 10.38 16.75 23.88
Pretax Margin (In
Percent) 3.6 8.8 8.9 9.9 10.9
Return on Equity
(In Percent) 4.7 12.4 13.2 15.3 16.5
Cash Flow from
Operations (Dollars
in Millions) 13.8 14.0 24.6 36.9 39.3
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
In fiscal 1996, the Company recorded the highest annual revenues, earnings, and
earnings per share in its history.
The following table shows the Company's revenue distribution by customer
industry for each of the years in the three-year period ended March 31, 1996:
1996 1995 1994
Financial Services 27% 24% 20%
Direct Marketing 26 22 25
Insurance 25 30 16
Information & Communication
Services 15 16 16
Media/Publishing 7 8 10
Other - - 13
--- --- ---
100% 100% 100%
Consolidated revenues were a record $269.9 million in 1996, up 33% from 1995
after also increasing 33% from 1994 to 1995. Financial services grew 51%,
including $20.8 million resulting from the acquisition of DataQuick Information
Systems and an 8% growth in credit card processing revenues. Direct marketing
revenues grew 61%, reflecting a $16 million increase in revenues from the Trans
Union Marketing Services contract and a 26% growth in other direct marketing
revenues. Insurance revenue increased 13%, including growth in revenue from the
Allstate Insurance Company data management agreement of 4% to $55.8 million.
Information and communication services revenues were up 34% reflecting revenues
from the outsourcing contract with The Polk Company of $6.5 million, 6% growth
in the Trans Union data center management agreement to $23.6 million and 30%
growth in the remaining industry group. Media/publishing revenues did not change
substantially from 1995.
In fiscal 1995, consolidated revenues grew $50.8 million from 1994,
including $36.4 million in the insurance industry largely due to the ramp-up of
the Allstate agreement. Financial services grew $18.3 million reflecting strong
activity in credit card marketing. Other industries' revenues increased $15.7
million, partially offset by decreases of $20.1 million as a result of the sale
of two of the Company's subsidiaries, Acxiom Mailing Services and BSA.
The following table presents operating expenses for each of the years
in the three-year period ended March 31, 1996 (in millions):
1995 to 1994 to
1996 1995 1994 1996 1995
Salaries & benefits $98.1 $67.3 $65.9 +46% +2%
Computer, communications
and other equipment 40.9 28.3 27.3 +45 +4
Data costs 63.4 60.0 17.4 +6 +245
Other operating costs
and expenses 35.8 23.8 25.8 +50 -8
----- ----- ----- --- ----
$238.2 $179.4 $136.4 +33% +32%
===== ===== ===== === ====
Salaries and benefits increased from 1995 to 1996 by 46%, due primarily to the
acquisitions in 1996 of DataQuick and Generator Datamarketing Limited, combined
with the effects of the Polk and Trans Union Marketing Services contracts. After
adjusting for the acquisitions and new contracts, the growth was 15%. By further
adjusting for the impact of the InfoBase/Acxiom Data Group, which was acquired
in 1995, the growth in salaries and benefits was only 9%, reflecting increased
headcount to support the growth of the business. Effective October 1, 1994
(fiscal 1995) the Company purchased the remaining 50% partnership interest in
InfoBase not previously owned, and began consolidating InfoBase results with the
Company's results. The 2% increase in 1995 resulted from increased headcount
associated with the core U.S. operation largely offset by decreases resulting
from the sales of the subsidiaries noted above.
In 1996, computer, communications and other equipment costs increased
45%, but after adjusting for the acquisitions and new contracts noted above
these costs actually declined by 4%. The 4% increase in 1995 was primarily due
to increases in the core operations, again partially offset by the decrease in
these costs for the subsidiaries divested.
Data costs in 1996 grew 6%, reflecting Allstate revenue growth of 4%
together with increased InfoBase revenues. In 1995, data costs increased $42.6
million as a result of the ramp-up in Allstate revenue combined with the data
costs associated with InfoBase revenues.
Other operating costs and expenses increased 50% in 1996; however,
after adjusting for the new contracts, acquisitions, and a full year of InfoBase
results, the increase is reduced to 15%. This increase primarily reflects larger
advertising expenditures and higher facilities costs associated with newly
constructed buildings at the Company's headquarters location. In 1995, other
operating costs and expenses decreased 8% due primarily to the effect of a
decrease in costs of hardware sales associated with BSA, which was sold in 1995.
Income from operations was a record $31.7 million, an increase of 37%
from 1995. Income from operations in 1995 increased 51% from 1994. The operating
margin also increased in 1996 to 11.7% from 11.4% in 1995 and 10.1% in 1994.
Interest expense decreased by $525,000 in 1996 due to lower interest
rates and the capitalization of $400,000 in interest costs incurred in the
construction of Company facilities. Interest expense in 1995 also decreased from
1994, due generally to lower levels of debt.
Other expense in 1995 increased due to the equity in operations of the
InfoBase partnership, which was a loss of $259,000 in the first half of 1995
compared to income of $811,000 in 1994. Other expense in 1995 also included a
$500,000 charge for the estimated cost of the disposal of certain assets of the
U.S. operations of BSA. Other expense in 1996 no longer includes the equity in
operations of InfoBase, since the Company has purchased and begun consolidating
the operations of InfoBase.
The Company's effective tax rate was 38%, 38% and 37% for 1996, 1995,
and 1994, respectively. In each year, the effective rate exceeded the U.S.
statutory rate primarily because of state income taxes, partially offset by
research and experimentation tax credits. The Company expects the effective tax
rate to remain in the 37-39% range next year.
Software and research and development spending was $10.4 million i
1996 compared to $8.1 million in 1995 and $7.7 million in 1994.
Net earnings was a record $18.2 million in 1996, up 47% from 1995 after
also increasing 48% from 1994 to 1995. Earnings per share of $.70 was also a
record in 1996, up 30% from 1995 after also increasing 42% from 1994 to 1995.
Capital Resources and Liquidity
Working capital at March 31, 1996 totaled $22.9 million compared to $18.6
million a year earlier. At March 31, 1996 the Company had available credit lines
of $31 million of which $12 million was outstanding. Subsequent to year end, the
Company issued a three-year convertible note in the amount of $25 million in
connection with the acquisition of Direct Media/DMI, Inc. See footnote 15 of the
notes to the consolidated financial statements for additional discussion of the
DMI transaction. The Company's debt-to-capital ratio (capital defined as
long-term debt plus stockholders' equity) was 18% at March 31, 1996 compared to
16% at March 31, 1995. Total stockholders' equity increased 26% to $122.7
million at March 31, 1996.
Cash provided by operating activities was a record $39.3 million for
1996 compared to $36.9 million in 1995 and $24.6 million in 1994. In 1996, $46.9
million was used by investing activities and $7.9 million was provided through
financing activities. Investing activities in 1996 included $5.9 million paid in
the acquisition of Generator Datamarketing Limited and capital expenditures of
$39 million, compared to $24.4 million in 1995 and $27.3 million in 1994.
Capital expenditures of $5.8 million, $9.0 million, and $15.9 million,
respectively, relate to assets acquired under the data center management
agreement with Trans Union Corporation. In 1996, the Company also completed an
expansion of its Conway data center and a new 100,000 square-foot customer
service building on its main campus in Conway, Arkansas. The two projects cost
approximately $12 million, and were funded through current operations and
existing credit lines.
The remainder of the capital expenditures in 1996 primarily relate to
data processing equipment and software to support the Company's network
computing strategy. The Company continues to develop innovative and proprietary
software and services using leading-edge technology. The Company has
re-engineered a number of key proprietary processes to run in the client server
world of network computing utilizing new low-cost parallel processors such as
the AT&T NCR 3550 and the DEC alpha. A large part of the Company's research
and development spending in recent years has gone into this new world of network
computing. The Company is accelerating this move to new technology while
continuing to grow the largest mainframe data center in the industry with over
four acres of raised floor data center space now housing over 20 IBM and Amdahl
mainframes representing over 1600 "MIPS" (Millions of Instructions Per Second)
of processing power in the Arkansas headquarters location. The Company has over
2300 MIPS of mainframe processing power in the whole enterprise including the
U.K. and the Chicago data centers.
Financing activities in 1996 include debt increases, net of debt
payments, of $7.1 million. Financing activities in 1996 also include the effects
of cash dividends and common stock transactions made by DataQuick prior to its
acquisition on August 25, 1995.
While the Company does not have any material contractual commitments
for capital expenditures, additional investments in facilities and computer
equipment will continue to be necessary to support the anticipated growth of the
business. In addition, new outsourcing or facilities management contracts
frequently require substantial up-front capital expenditures in order to acquire
existing assets. Management believes that the combination of existing working
capital, anticipated funds to be generated from future operations and the
Company's available credit lines is sufficient to meet the Company's current
operating needs as well as to fund the anticipated levels of capital
expenditures. If additional funds are required, the Company would use existing
credit lines to generate cash, followed by either additional borrowings to be
secured by the Company's assets or the issuance of additional equity securities
in either public or private offerings. Management believes that the Company has
significant unused capacity to raise capital which could be used to support
future growth.
As discussed in footnote 13 to the consolidated financial statements,
the Company is involved in an arbitration claim which, if resolved against the
Company, could result in payment of an amount which could be material to the
financial statements. However, management believes the ultimate outcome of this
case will result in a settlement, if any, which will not be material to the
financial statements.
Seasonality and Inflation
Although the Company cannot accurately determine the amounts attributable
thereto, the Company has been affected by inflation through increased costs of
compensation and other operating expenses. Generally, the effects of inflation
are offset by technological advances, economies of scale and other operational
efficiencies. The Company has established a pricing policy for long-term
contracts which provides for the effects of expected increases resulting from
inflation.
The Company's operations have not proved to be significantly seasonal,
although the Company's traditional direct marketing operations experience
slightly higher revenues in the Company's second and third quarters. In order to
minimize the impact of these fluctuations, the Company continues to move toward
long-term strategic partnerships with more predictable revenues. Revenues under
long-term contract (defined as three years or longer) were 52%, 43%, and 38% of
consolidated revenues for 1996, 1995 and 1994, respectively.
Acquisitions and Partnerships
The Company completed two acquisitions during the year ended March 31, 1996. The
acquisition of Generator Datamarketing Limited in the U.K. was accounted for as
a purchase and the acquisition of DataQuick Information Systems was accounted
for as a pooling of interests. See footnote 15 to the consolidated financial
statements for a more detailed discussion of these transactions. Subsequent to
year end, the Company completed two additional acquisitions, which became
effective as of April 1, 1996. The acquisition of Pro CD, Inc. will be accounted
for as a pooling of interests and Direct Media/DMI, Inc. will be accounted for
as a purchase. See footnote 15 to the consolidated financial statements for more
information regarding these acquisitions. Together, these four acquisitions are
expected to contribute approximately $100 million in revenue in fiscal 1997.
In October 1995, the Company announced a letter of intent to form a
business alliance with the Polk Company. The Company has assumed management of
Polk's data center in Taylor, Michigan and has completed a definitive ten-year
agreement effective November 1, 1995. A phased program will transfer Polk's data
center operations to the Company's headquarters in Conway. Management estimates
the agreement will contribute $15-16
million in initial annual revenue. The Company and Polk are also exploring joint
ventures in marketing, product development, data acquisition, and international
sales. The exact nature of the partnership in these areas will be determined by
future discussions.
Other Information
In 1996, 1995, and 1994, the Company had two customers who accounted for more
than 10% of revenue. Allstate accounted for 20.7%, 26.4% and 12.6% in 1996,
1995, and 1994, respectively, and Trans Union accounted for 15.5%, 12.6% and
13.6% in 1996, 1995, and 1994, respectively. The Trans Union data center
management agreement and marketing services agreement are for terms expiring in
2002 and the Allstate agreement's five-year term will expire in fiscal 1998. The
Company does not have any reason to believe that either of these customers will
not continue to do business with the Company.
Acxiom U.K., the Company's United Kingdom business unit, provides
services to the United Kingdom market which are similar to the traditional
direct marketing industry services the Company provides in the United States. In
addition, Acxiom U.K. also provides promotional materials handling and
fulfillment services to U.K. customers. The recent Generator acquisition as well
as certain operations of Direct Media will also be managed through Acxiom U.K.
Most of the Company's exposure to exchange rate fluctuation is due to
translation gains and losses as there are no material transactions which cause
exchange rate impact. The U.K. operation generally funds its own operations and
capital expenditures, although the Company occasionally advances funds from the
U.S. to the U.K. 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 financial statements into U.S. dollars are
accumulated in a separate component of stockholders' equity. There are no
restrictions on transfers of funds from the U.K.
As noted in footnote 12 to the consolidated financial statements, the
Company's United Kingdom operations have sustained losses of $399,000, $856,000
and $1,008,000 in 1996, 1995 and 1994, respectively. The losses in both 1995 and
1994 resulted from the BSA UK operation which sold catalog fulfillment software.
This operation was sold in 1995. The loss in 1996 resulted from the operation of
Generator Datamarketing Limited, which was acquired in 1996. Management expects
the combined operations in the U.K. to be profitable in fiscal 1997.
The Financial Accounting Standards Board has issued statements No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of" and No. 123, "Accounting for Stock-Based Compensation."
Statement No. 121 will be adopted by the Company in fiscal 1997. As permitted by
Statement No. 123, the Company plans to adopt only the disclosure requirements
of the statement beginning in fiscal 1997, while continuing to account for
employee stock options under existing accounting rules. Management does not
expect any material impact to the Company's financial statements from the
implementation of these new accounting standards.
The Company has adopted a comprehensive privacy policy which includes
recognition of consumers' rights to control the dissemination of information
about themselves, the Company's commitment to strict data security to avoid
unauthorized disclosures and support for programs which consumers can use to opt
out of unrequested solicitations. The Company is taking the lead in exploring
industry self-regulation that might preempt, or be used as a model for, any
national policy mandated by Congress.
Outlook
With the recent acquisitions just completed, management expects revenue to grow
more than 40% to the $385 - 390 million range, and earnings per share is
expected to grow more than 30%, including the 11% dilution from the new shares
issued in conjunction with the latest two acquisitions. The business continues
to show promise for growth both domestically and in the U.K.
The information contained in this outlook section is a forward-looking
statement that involves a number of risks and uncertainties. Among the factors
that could cause actual results to differ materially are the following: business
conditions in the industries served by the Company and the general economy,
competition, new laws and regulations impacting the services the Company
provides, and other risk factors listed from time to time in the Company's
reports to the Securities and Exchange Commission.
(This page and the following sixteen (16) pages correspond to pages 26-42
Consolidated Balance Sheets
March 31, 1996 and 1995
Assets 1996 1995
- ------ ---- ----
Current assets:
Cash and cash equivalents $ 3,469,000 3,149,000
Trade accounts receivable, net 44,474,000 37,764,000
Refundable income taxes 1,537,000 -
Other current assets (notes 7 and 14) 4,534,000 2,604,000
----------- -----------
Total current assets 54,014,000 43,517,000
Property and equipment, net of
accumulated depreciation and
amortization (notes 3, 4 and 5) 89,101,000 67,419,000
Software, net of accumulated
amortization of $9,714,000 in 1996
and $6,601,000 in 1995 (note 2) 10,524,000 9,693,000
Excess of cost over fair value of net
assets acquired, net of accumulated
amortization of $2,593,000 in
1996 and $1,673,000 in 1995 (note 8) 13,982,000 9,638,000
Other assets (note 14) 26,428,000 17,903,000
----------- -----------
$ 194,049,000 148,170,000
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Short-term notes payable 646,000 -
Current installments of long-term debt
(note 4) 3,866,000 3,564,000
Trade accounts payable 13,596,000 8,342,000
Accrued expenses:
Interest 435,000 522,000
Payroll and payroll related 5,111,000 5,280,000
Other 7,189,000 7,055,000
Advances from customers 316,000 162,000
Income taxes - 39,000
----------- -----------
Total current liabilities 31,159,000 24,964,000
Long-term debt, excluding current
installments (note 4) 26,885,000 18,219,000
Deferred income taxes (note 7) 10,933,000 7,138,000
Deferred revenue 2,331,000 672,000
Stockholders' equity (notes 6, 10 and 15):
Preferred stock - -
Common stock 2,435,000 2,308,000
Additional paid-in capital 54,514,000 46,493,000
Retained earnings 68,978,000 50,776,000
Foreign currency translation adjustment (863,000) 7,000
Treasury stock, at cost (2,323,000) (2,407,000)
----------- -----------
Total stockholders' equity 122,741,000 97,177,000
Commitments and contingencies (notes
4, 5, 8, 9, 10 and 13) ----------- -----------
$ 194,049,000 148,170,000
=========== ===========
See accompanying notes to consolidated financial statements.
Consolidated Statements of Earnings
Years ended March 31, 1996, 1995 and 1994
1996 1995 1994
---- ---- ----
Revenue (notes 8, 10 and 11) $ 269,902,000 202,448,000 151,669,000
Operating costs and expenses
(notes 2, 8 and 9):
Salaries and benefits 98,075,000 67,287,000 65,924,000
Computer, communications and other
equipment 40,972,000 28,330,000 27,284,000
Data costs 63,442,000 59,963,000 17,356,000
Other operating costs and expenses 35,755,000 23,803,000 25,841,000
----------- ----------- -----------
Total operating costs and expenses 238,244,000 179,383,000 136,405,000
----------- ----------- -----------
Income from operations 31,658,000 23,065,000 15,264,000
----------- ----------- -----------
Other income (expense):
Interest expense (1,863,000) (2,388,000) (2,770,000)
Other, net (note 8) (399,000) (602,000) 939,000
----------- ----------- -----------
(2,262,000) (2,990,000) (1,831,000)
----------- ----------- -----------
Earnings before income taxes 29,396,000 20,075,000 13,433,000
Income taxes (note 7) 11,173,000 7,670,000 5,036,000
----------- ----------- -----------
Net earnings $ 18,223,000 12,405,000 8,397,000
=========== =========== ===========
Earnings per share $ .70 .54 .38
=== === ===
Weighted average shares outstanding 26,039,000 22,943,000 21,840,000
=========== =========== ===========
See accompanying notes to consolidated financial statements.
Consolidated Statements of Stockholders' Equity
Years ended March 31, 1996, 1995 and 1994
Common stock
--------------------------
Number Additional
of paid-in
shares Amount capital
Balances at March 31, 1993 20,571,640 $ 2,057,000 22,715,000
Sale of common stock 400,424 40,000 1,401,000
Tax benefit of stock options
exercised (note 7) - - 483,000
Purchase of treasury stock - - -
Issuance of treasury stock
for employee awards - - 9,000
Issuance of treasury stock
to retirement savings plan - - 16,000
Accretion on redeemable common
stock (note 10) - - -
Translation adjustment - - -
Net earnings - - -
---------- ---------- ----------
Balances at March 31, 1994 20,972,064 2,097,000 24,624,000
Sale of common stock (note 6) 1,144,227 115,000 12,833,000
Tax benefit of stock options
exercised (note 7) - - 252,000
Issuance of common stock
warrants (note 10) - - 536,000
Issuance of treasury stock to
retirement savings plan - - 461,000
Accretion on redeemable common
stock (note 10) - - -
Transfer of redeemable common
stock to stockholders' equity
(note 10) 960,000 96,000 7,787,000
Translation adjustment - - -
Net earnings - - -
---------- ---------- ----------
Balances at March 31, 1995 23,076,291 2,308,000 46,493,000
Dataquick merger (note 15) 984,839 98,000 5,212,000
Retirement of DataQuick common
stock prior to merger - - (1,010,000)
Sale of DataQuick common stock
prior to merger - - 190,000
Dataquick dividends prior to
merger - - -
Sale of common stock 281,397 28,000 2,091,000
Tax benefit of stock options
exercised (note 7) - - 656,000
Issuance of employee stock
awards 6,678 1,000 102,000
Issuance of treasury stock
to retirement savings plan
and for directors' fees - - 780,000
Translation adjustment - - -
Net earnings - - -
---------- ---------- ----------
Balances at March 31, 1996 24,349,205 $ 2,435,000 54,514,000
========== ========== ==========
See accompanying notes to consolidated financial statements.
Consolidated Statements of Stockholders' Equity
Years ended March 31, 1995, 1994 and 1993
Treasury Stock
Foreign Total
currency Number stockholders'
Retained translation of equity
earnings adjustment shares Amount (note 6)
Balances at March
31, 1993 30,635,000 (668,000) (708,448) (2,568,000) 52,171,000
Sale of common
stock - - - - 1,441,000
Tax benefit of
stock options
exercised
(note 7) - - - - 483,000
Purchase of
treasury stock - - (2,156) (20,000) (20,000)
Issuance of
treasury stock
for employee
awards - - 1,700 6,000 15,000
Issuance of
treasury stock
to retirement
savings plan - - 3,372 13,000 29,000
Accretion on
redeemable
common stock
(note 10) (470,000) - - - (470,000)
Translation
adjustment - (150,000) - - (150,000)
Net earnings 8,397,000 - - - 8,397,000
---------- -------- -------- ---------- ----------
Balances at March
31, 1994 38,562,000 (818,000) (705,532) (2,569,000) 61,896,000
Sale of common
stock (note 6) - - - - 12,948,000
Tax benefit of
stock options
exercised
(note 7) - - - - 252,000
Issuance of
common stock
warrants
(note 10) - - - - 536,000
Issuance of
treasury stock
to retirement
savings plan - - 49,747 162,000 623,000
Accretion on
redeemable
common stock
(note 10) (191,000) - - - (191,000)
Transfer of
redeemable
common stock
to stockholders'
equity (note 10) - - - - 7,883,000
Translation
adjustment - 825,000 - - 825,000
Net earnings 12,405,000 - - - 12,405,000
---------- -------- -------- --------- -----------
Balances at
March 31, 1995 50,776,000 7,000 (655,785) (2,407,000) 97,177,000
Dataquick merger
(note 15) 447,000 - - - 5,757,000
Retirement of
DataQuick
common stock
prior to merger - - - - (1,010,000)
Sale of DataQuick
common stock
prior to merger - - - - 190,000
Dataquick
dividends prior
to merger (468,000) - - - (468,000)
Sale of common
stock - - - - 2,119,000
Tax benefit of
stock options
exercised
(note 7) - - - - 656,000
Issuance of
employee stock
awards - - - - 103,000
Issuance of
treasury stock
to retirement
savings plan
and for
directors' fees - - 34,664 84,000 864,000
Translation
adjustment - (870,000) - - (870,000)
Net earnings 18,223,000 - - - 18,223,000
---------- -------- -------- --------- -----------
Balances at March
31, 1996 68,978,000 (863,000) (621,121) (2,323,000) 122,741,000
========== ======== ======== ========= ===========
Consolidated Statements of Cash Flows
Years ended March 31, 1996, 1995 and 1994
1996 1995 1994
---- ---- ----
Cash flows from operating activities:
Net earnings $ 18,223,000 12,405,000 8,397,000
Non-cash operating activities:
Depreciation and amortization 21,602,000 19,566,000 19,397,000
Loss on disposal of assets 49,000 114,000 44,000
Equity in operations of joint venture - 259,000 (811,000)
Deferred taxes 3,434,000 319,000 1,492,000
Other, net 149,000 1,803,000 787,000
Changes in operating assets and
liabilities:
Accounts receivable (4,092,000) (8,271,000) (5,661,000)
Other assets (5,173,000) 60,000 2,282,000
Accounts payable and other liabilities 5,115,000 10,692,000 (1,337,000)
---------- ---------- ----------
Net cash provided by operating
activities 39,307,000 36,947,000 24,590,000
---------- ---------- ----------
Cash flows from investing activities:
Disposition of assets 402,000 5,717,000 118,000
Cash received in merger 1,624,000 - -
Development of software (3,944,000) (1,084,000) (1,718,000)
Capital expenditures (39,021,000) (24,417,000) (27,325,000)
Advances to joint venture - - (616,000)
Net cash paid in acquisitions
(notes 8 and 15) (5,914,000) (7,290,000) -
Net cash included in disposition - - (1,471,000)
---------- ----------- -----------
Net cash used by investing activities (46,853,000) (27,074,000) (31,012,000)
---------- ----------- -----------
Cash flows from financing activities:
Proceeds from current and long-term
debt 11,995,000 - 5,442,000
Payments of current and long-term debt (4,897,000) (20,147,000) (1,446,000)
Sale of common stock 2,309,000 12,948,000 1,441,000
Purchase of treasury stock - - (20,000)
Dataquick pre-merger retirement of
common stock (1,010,000) - -
Dataquick pre-merger dividends (468,000) - -
----------- ----------- -----------
Net cash provided (used) by
financing activities 7,929,000 (7,199,000) 5,417,000
----------- ----------- -----------
Effect of exchange rate changes on cash (63,000) - 1,000
----------- ----------- -----------
Net increase (decrease) in cash and
cash equivalents 320,000 2,674,000 (1,004,000)
Cash and cash equivalents at beginning
of year 3,149,000 475,000 1,479,000
----------- ----------- -----------
Cash and cash equivalents at end of year $ 3,469,000 3,149,000 475,000
=========== =========== ===========
Supplemental cash flow information:
Non-cash investing and financing
activities:
Capital lease obligations incurred $ - $ 566,000 $ 500,000
Non-cash proceeds from disposition
(note 14) - - 12,672,000
Warrants issued in asset acquisition
(note 10) - 536,000 -
Cash paid during the year for:
Interest 2,214,000 2,475,000 2,845,000
Income taxes 8,660,000 6,137,000 3,128,000
=========== ========= ===========
See accompanying notes to consolidated financial statements.
Notes to Consolidated Financial Statements
March 31, 1996, 1995 and 1994
(1) Summary of Significant Accounting Policies
(a) Nature of Operations
The Company provides information management technology and other related
services, primarily for marketing applications. Operating units of
the Company provide list processing services, data warehouse
services, data and information products, fulfillment services,
computerized list, postal and database services, and outsourcing and
facilities management services in both the United States (U.S.) and
United Kingdom (U.K.).
(b) Consolidation Policy
The consolidated financial statements include the accounts of Acxiom
Corporation and its subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation.
Prior to October 1, 1994 the Company carried its 50% interest in
Infobase Services ("Infobase") on the equity method (see note 8).
(c) Revenue Recognition
Revenues from the production of direct marketing lists and CD-ROM
products are recognized when shipped. Revenues from data processing
and outsourcing and facilities management services are recognized
when the services are performed. Costs incurred in connection with
the conversion phase of outsourcing and facilities management
contracts are deferred and amortized over the life of the contract.
Included in other assets are unamortized conversion costs in the
amount of $10,620,000 and $4,725,000 at March 31, 1996 and 1995,
respectively. Revenues from software licenses are recognized
primarily when the software is installed or when the Company fulfills
its obligations under the sales contract. The Company recognizes
revenue from long-term contracts involving significant production,
modification, or customization of software using the
percentage-of-completion method, based on performance milestones
specified in the contract where such milestones fairly reflect
progress toward contract completion. In other instances, progress
toward completion is based on individual contract costs incurred to
date compared with total estimated contract costs. Revenues
associated with the promotional fulfillment service are recognized
based on usage of the service. Billed but unearned portions of
revenues are reported as deferred revenues.
(d) Accounts Receivable
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of trade receivables.
All of the Company's receivables are from a large number of customers
located throughout the U.S. and the U.K. Accordingly, the Company's
credit risk is affected by general economic conditions. Although the
Company has several large individual customers, concentrations of
credit risk are limited because of the diversity of the Company's
customers.
Trade accounts receivable are presented net of allowances for doubtful
accounts and credits of $1,880,000 and $2,143,000 in 1996 and
1995, respectively.
(e) Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization
are calculated on the straight-line method over the estimated useful
lives of the assets as follows:
Estimated useful lives
Buildings and improvements 5 - 30 years
Office furniture and equipment 3 - 10 years
Data processing equipment 2 - 10 years
Gains or losses resulting from sales or retirements are recorded as
incurred, at which time related costs and accumulated depreciation
are removed from the accounts. Maintenance and repairs are charged to
expense as incurred. Property held under capitalized lease
arrangements is included in property and equipment, and the
associated liabilities are included with long-term debt. Property and
equipment taken out of service and held for sale is recorded at net
realizable value and depreciation is ceased.
(f) Software and Research and Development Costs
Capitalized and purchased software costs are amortized on a
straight-line basis over the remaining estimated economic life of the
product, or the amortization that would be recorded by using the
ratio of gross revenues for a product to total current and
anticipated future gross revenues for that product, whichever is
greater. Research
and development costs incurred prior to establishing technological
feasibility of software products are charged to operations as
incurred.
(g) Excess of Cost Over Fair Value of Net Assets Acquired
The excess of acquisition costs over the fair values of net assets
acquired in business combinations treated as purchase transactions
(goodwill) are being amortized on a straight-line basis over 15 to 25
years from acquisition dates. The Company periodically evaluates the
existence of goodwill impairment on the basis of whether the goodwill
is fully recoverable from the projected, undiscounted net cash flows
of the related business unit.
(h) Income Taxes
The Company and its domestic subsidiaries file a consolidated Federal
income tax return. The Company's foreign subsidiaries file separate
income tax returns in the United Kingdom.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income
in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
(i) Foreign Currency Translation
The balance sheets of the Company's foreign subsidiaries are translated
at year-end rates of exchange, and the statements of earnings are
translated at the weighted average exchange rate for the period.
Gains or losses resulting from translating foreign currency financial
statements are accumulated in a separate component of stockholders'
equity.
(j) Earnings Per Share
Earnings per share computations are based upon the weighted average
number of shares outstanding as adjusted for the two-for-one stock
split (see note 6). The weighted average number of shares outstanding
includes redeemable common shares and the dilutive effect of stock
options and warrants which are considered common stock equivalents
(see note 10).
(k) Statement of Cash Flows
The Company considers highly liquid, short-term investments with
original maturities of three months or less when acquired to be cash
equivalents. Capital expenditures include payments for property and
equipment and conversion costs.
(l) Use of Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the consolidated financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from these estimates.
(2) Software and Research and Development Costs
The Company recorded amortization expense related to internally
developed and purchased computer software of $3,113,000, $2,246,000
and $1,232,000 in 1996, 1995 and 1994, respectively. Additionally,
research and development costs of $6,440,000, $7,020,000, and
$5,912,000 were charged to operations during 1996, 1995 and 1994,
respectively.
(3) Property and Equipment
Property and equipment are summarized as follows:
1996 1995
---- ----
Land $ 2,233,000 1,214,000
Buildings and improvements 50,778,000 37,819,000
Office furniture and equipment 11,097,000 8,288,000
Data processing equipment 89,116,000 76,000,000
------------ ------------
153,224,000 123,321,000
Less accumulated depreciation
and amortization 64,123,000 55,902,000
------------ ------------
$ 89,101,000 67,419,000
============ ============
(4) Long-Term Debt
Long-term debt consists of the following:
1996 1995
---- ----
9.75% Senior Notes, due May 1, 2000,
payable in annual installments of
$2,143,000 each May 1; interest is
payable semiannually $ 10,714,000 12,857,000
Unsecured revolving credit agreement 11,995,000 -
8.94% note payable due in monthly
installments of principal and
interest of $50,000 with remaining
balance due June 30, 1997;
collateralized by real estate 4,264,000 4,475,000
Other notes and capital lease obligation
payable (notes 5 and 8) 3,778,000 4,451,000
----------- -----------
Total long-term debt 30,751,000 21,783,000
Less current installments 3,866,000 3,564,000
----------- -----------
Long-term debt, excluding current
installments $ 26,885,000 18,219,000
========== ==========
The unsecured credit agreement provides for revolving loans in amounts of
up to $30,000,000. The terms of the credit agreement provide for
interest at the prime rate (or, at the Company's option, at other
alternative market rates). At March 31, 1996, the effective rate was
7.25%. The agreement requires a commitment fee equal to 3/16 of 1% on
the average unused portion of the loan. The credit agreement expires on
August 31, 1998. The Company also has another unsecured line of credit
amounting to $1,000,000, of which none was outstanding at March 31,
1996. The other unsecured line expires in June 1996 and bears interest
at prime minus 1/2 of 1%.
Under the terms of certain of the above borrowings, the Company is required
to maintain certain tangible net worth levels and working capital, debt
to equity and debt service coverage ratios. At March 31, 1996, the
Company was in compliance with all such requirements. As a result of the
acquisitions in April 1996 (see note 15), the Company was in violation
of certain financial covenants subsequent to March 31, 1996. The Company
has received waivers with respect to such covenants. Subsequent to March
31, 1996, the credit agreement was amended to provide for revolving
loans and letters of credit in amounts up to $55,000,000 and to extend
the expiration date of the agreement to July 30, 1999. Letters of credit
in the amount of $25,000,000 were issued in connection with the
acquisition of DMI (see note 15). The aggregate maturities of long-term
debt for the five years ending March 31, 2001 are as follows: 1997,
$3,866,000; 1998, $7,734,000; 1999, $2,816,000; 2000, $14,190,000; and
2001, $2,145,000.
(5) Leases
The Company leases data processing equipment, office furniture and
equipment, land and office space under noncancellable operating leases
and capital leases. Total property and accumulated amortization held
under capital leases amount to $2,062,000 and $721,000,
respectively, at March 31, 1996. Amortization of property held under
capital leases is included in depreciation expense. Future minimum lease
payments under noncancellable operating leases and capital leases as of
March 31, 1996 are as follows:
Capital Operating
leases leases
Year ending March 31:
1997 $ 342,000 2,437,000
1998 321,000 1,726,000
1999 305,000 1,280,000
2000 53,000 1,081,000
2001 - 540,000
Thereafter (through 2039) - 4,451,000
--------- =========
Total capital lease payments 1,021,000
Less amount representing interest (112,000)
---------
Present value of minimum capital
lease payments (note 4) 909,000
---------
Less current installments of
obligations under capital leases (283,000)
---------
Obligations under capital leases,
excluding current installments $ 626,000
=========
Total rental expense each year on operating leases was as follows:
1996 1995 1994
---- ---- ----
Gross rentals (note 8) $ 3,793,000 2,169,000 2,116,000
Sublease rentals 44,000 76,000 154,000
---------- ---------- ----------
$ 3,749,000 2,093,000 1,962,000
========== ========== ==========
(6) Stockholders' Equity
On October 26, 1994 the Board of Directors declared a two-for-one stock
split, effected in the form of a stock dividend, which was distributed
on January 10, 1995 to shareholders of record on December 27, 1994. All
share and per share data in the financial statements have been restated
to give effect to the stock split. Additionally, during the year ended
March 31, 1995, the Company sold 1,000,000 shares of newly-issued common
stock to Trans Union Corporation for approximately $12,000,000.
The Company has 60,000,000 authorized shares of $.10 par value common stock
and 1,000,000 shares of authorized but unissued $1.00 par value
preferred stock. The Board of Directors of the Company may designate the
relative rights and preferences of the preferred stock when and if
issued. Such rights and preferences could include liquidation
preferences, redemption rights, voting rights and dividends and the
shares could be issued in multiple series with different rights and
preferences. The Company currently has no plans for the issuance of any
shares of preferred stock.
The Company has for its U.S. employees a Key Employee Stock Option Plan
("Plan") for which 7,600,000 shares of the Company's common stock have
been reserved. The Company has for its U.K. employees a U.K. Share
Option Scheme ("Scheme") for which 800,000 shares of the Company's
common stock have been reserved. These plans generally provide that the
option price will be at least the fair market value at the time of the
grant, except that the option price of nonqualified options granted
under the Plan is determined by the Board of Directors. Any options
granted under the plans must be exercised within 10 years after the date
of the option. At March 31, 1996, 1,652,845 shares and 399,004 shares
are available for future grants under the Plan and the Scheme,
respectively.
Activity in stock options was as follows:
Number Options Number of
of price shares
shares per share exercisable
Outstanding at March 31, 1993 2,530,974 $ 2.00 - 12.50 640,176
Granted 171,678 11.75 - 23.50
Exercised (348,816) 2.00 - 5.13
Terminated (53,608) 2.00 - 12.50
---------
Outstanding at March 31, 1994 2,300,228 2.75 - 23.50 514,422
Granted 394,432 10.75 - 31.50
Exercised (92,775) 2.83 - 12.50
Terminated (137,537) 2.83 - 23.50
---------
Outstanding at March 31, 1995 2,464,348 2.75 - 31.50 857,983
Granted 780,278 17.95 - 49.62
DataQuick acquisition (note 15) 808,370 2.98 - 13.49
Exercised (185,523) 2.83 - 19.86
Terminated (3,000) 2.83
---------
Outstanding at March 31, 1996 3,864,473 2.75 - 49.62 1,733,864
========= ============= =========
The Company maintains an employee stock purchase plan which provides for
the purchase of shares of common stock by its U.S. employees through
payroll deductions which may not exceed 10% of employee compensation.
The price of the stock purchased under the plan is 85% of the market
price as of the date the stock is purchased for the employee by the
Trustee of the plan. The Company maintains a similar plan for its U.K.
employees. There were 95,235, 49,976 and 51,606 shares purchased under
the plans during the years ended March 31, 1996, 1995 and 1994,
respectively.
(7) Income Taxes
Total income tax expense was allocated as follows:
1996 1995 1994
---- ---- ----
Income from operations $ 11,173,000 7,670,000 5,036,000
Stockholders' equity, for
compensation expense for
tax purposes in excess of
amounts recognized for
financial reporting purposes (656,000) (252,000) (483,000)
---------- --------- ---------
$ 10,517,000 7,418,000 4,553,000
========== ========= =========
Income tax expense attributable to income from operations consists of:
1996 1995 1994
---- ---- ----
Current expense:
Federal $ 6,720,000 5,953,000 2,841,000
Foreign - - 72,000
State 1,019,000 1,398,000 631,000
--------- --------- ---------
7,739,000 7,351,000 3,544,000
--------- --------- ---------
Deferred expense (benefit):
Federal 2,706,000 1,027,000 1,778,000
Foreign 161,000 (408,000) (411,000)
State 567,000 (300,000) 125,000
--------- --------- ---------
3,434,000 319,000 1,492,000
---------- --------- ---------
Total tax expense $ 11,173,000 7,670,000 5,036,000
========== ========= =========
The actual income tax expense attributable to income from operations differs
from the expected tax expense (computed by applying the U.S. Federal
corporate tax rate of 35% to income before income taxes) as follows:
1996 1995 1994
---- ---- ----
Computed expected tax expense $ 10,289,000 7,026,000 4,702,000
Increase (reduction) in income
taxes resulting from:
State income taxes, net of
Federal income tax benefit 1,031,000 714,000 491,000
Research and experimentation
credits (800,000) (315,000) (259,000)
Other 653,000 245,000 102,000
---------- --------- ---------
$ 11,173,000 7,670,000 5,036,000
========== ========= =========
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at March 31, 1996 and 1995
are presented below.
1996 1995
---- ----
Deferred tax assets:
Accrued expenses not deductible for
tax purposes $ 1,692,000 1,209,000
Investment in Infobase, principally due
to differences in basis for tax and
financial reporting purposes 330,000 112,000
United Kingdom net operating loss
carryforwards 1,088,000 738,000
Other 929,000 287,000
Valuation allowance (328,000) -
--------- ---------
Total deferred tax assets 3,711,000 2,346,000
--------- ---------
Deferred tax liabilities:
Property and equipment, principally due
to differences in depreciation (6,263,000) (5,026,000)
Capitalized software and other costs
expensed as incurred for tax purposes (6,431,000) (2,703,000)
Installment sale gains for tax purposes (254,000) (420,000)
---------- ----------
Total deferred tax liabilities (12,948,000) (8,149,000)
---------- ----------
Net deferred tax liability $ (9,237,000) (5,803,000)
========== =========
The evaluation allowance relates to acquired deferred tax assets (primarily
net operating loss carryforwards) in the U.K. Generator acquisition. The
Company believes its substantial history of profitability and taxable
income and its utilization of tax planning sufficiently supports the
value of the remaining deferred tax assets. Accordingly, the Company has
not recorded a valuation allowance as all other deferred tax assets are
more likely than not to be recovered. Included in other current assets
are current deferred tax assets of $1,696,000 and $1,335,000 at March
31, 1996 and 1995, respectively.
(8) Related Party Transactions
The Company leases certain equipment from a business partially owned by an
officer. Rent expense under these leases during the years ended March
31, 1996, 1995 and 1994 was approximately $371,000, $247,000, and
$225,000, respectively. Under the terms of the lease in effect at March
31, 1996 the Company will make monthly lease payments of $68,000 through
December, 2000. The Company has agreed to pay the difference, if any,
between the sales price of the equipment and 70 percent of the lessor's
related loan balance (approximately $5,500,000 at March 31, 1996) should
the Company elect to exercise its early termination rights or not extend
the lease beyond its initial five year term and the lessor sells the
equipment as a result thereof.
Effective October 1, 1994, the Company purchased the remaining one-half
interest in the Infobase partnership owned by ADVO, Inc. The purchase
price consisted of $9,000,000 in cash and service discounts over the
next four years. If the service discounts do not aggregate at least
$2,560,000 over the four-year period, the shortfall will be paid in
cash. The balance of the liability at March 31, 1996 and 1995, which is
included in long-term debt, is $1,958,000 and $2,560,000, respectively.
The Company has accounted for the purchase of the partnership interest
using the purchase method of accounting. The aggregate investment in the
InfoBase partnership has been allocated as follows:
Cash paid $ 9,000,000
Less cash purchased 1,710,000
----------
Net cash expenditure 7,290,000
Service discounts 2,560,000
Investment in and advances to joint venture
prior to purchase 3,715,000
----------
Total investment $ 13,565,000
==========
Software 5,797,000
Excess of cost over fair value of net assets acquired 7,049,000
Accounts receivable 2,612,000
Property and equipment 442,000
Deferred tax asset 115,000
Other assets 7,000
Accounts payable and other liabilities (2,457,000)
----------
Total investment $ 13,565,000
==========
The amount of the purchase price allocated to software is being amortized
over the estimated remaining economic life of the software products of
2 to 4 years. The excess of cost over fair value of net assets acquired
is being amortized using the straight line method over its estimated
economic life of 15 years.
The following consolidated pro forma financial information (which includes
adjustments to reflect the accounting bases recognized in recording the
purchase and to eliminate the effects of transactions between the
Company and InfoBase) shows the results of the Company's operations for
the years ended March 31, 1995 and 1994 as though the purchase of
InfoBase had occurred at the beginning of each period presented:
1995 1994
---- ----
Revenue $ 205,178,000 164,488,000
=========== ===========
Net earnings $ 11,865,000 8,170,000
=========== ===========
Earnings per share $ .52 .37
=== ===
The operations of InfoBase are included in the Company's consolidated
results of operations beginning October 1, 1994. Prior to that date, the
Company's 50% equity in the operations of the joint venture was included
in other income (expense). Included in revenue is $1,562,000 and
$2,236,000 from sales of services to Infobase in 1995 and 1994,
respectively. Infobase also reimbursed the Company for processing,
programming, and facility costs amounting to $2,585,000 and $5,042,000
in 1995 and 1994, respectively. Commissions paid to Infobase for list
enhancement services totaled $4,395,000 and $6,518,000 in 1995 and 1994,
respectively. Included in other income (expense) is the Company's 50%
share of the earnings (loss) of the partnership amounting to $(259,000)
and $811,000 in 1995 and 1994, respectively.
(9) Retirement Plans
The Company has a retirement savings plan which covers substantially all
domestic employees. The Company also offers a supplemental non-qualified
deferred compensation plan for certain management employees. The Company
matches 50% of the employee's salary deferred contributions under both
plans up to 6% in total annually and may contribute amounts to the plans
from the Company's earnings at the discretion of the Board of Directors.
Company contributions amounted to approximately $835,000, $653,000, and
$417,000 in 1996, 1995 and 1994, respectively.
(10) Data Center Agreement
Effective August 31, 1992, the Company entered into a data center
management agreement with Trans Union Corporation ("Trans Union"). Under
the agreement, the Company will manage Trans Union's data processing
center for annual fees of approximately $20 million for the existing
base capacity, with revenues to be adjusted in the future for changes in
Trans Union's capacity requirements.
At closing, the Company acquired certain Trans Union data center assets for
$6,698,000, consisting of $1,038,000 in cash, a purchase liability of
$490,000 payable in two equal annual installments, 960,000 shares of
newly-issued redeemable common stock valued at $5,035,000 and a warrant
to purchase additional shares of common stock valued at $135,000. Trans
Union had the right to cause the Company to repurchase the stock between
years 2 1/2 and 5 at the higher of $5.625 per share or fair market
value. The stock was callable by the Company during the same period at
$8.438 per share. The difference between the assigned value of the
redeemable common stock and the estimated redemption value per share was
being accreted through charges to retained earnings. On August 31, 1994
the Company announced the extension of its data center management
agreement with Trans Union. The extension will carry the contract
through August 2002, its full term of 10 years. As part of the extension
agreement, Trans Union agreed to give up its right to cause the Company
to repurchase the 960,000 shares of common stock then held by Trans
Union. At the same time, the Company gave up its right to call the
stock. Accordingly, the $7,883,000 in carrying value of the redeemable
common stock has been reclassified to stockholders' equity.
The warrant, which expires on August 31, 2000, entitles Trans Union to
acquire up to 2,000,000 additional shares of newly issued common stock.
The exercise price for the warrant stock is $5.625 per share in years
one through five of the agreement, $6.125 in year six, $6.625 in year
seven and $7.125 in year eight. The first 500,000 shares became
exercisable as of closing. The remaining 1,500,000 shares became
exercisable upon Trans Union's election to extend the agreement. The
value ($536,000) of the additional shares which became exercisable under
the warrant has been credited to additional paid-in capital. Trans Union
is precluded from exercising the warrant to the extent that the shares
acquired thereunder would cause its percentage ownership of the
Company's common stock acquired pursuant to the agreement to exceed 10%
of the Company's then issued and outstanding common stock. Based on
shares outstanding at March 31, 1996, Trans Union would be entitled to
purchase approximately 1,565,000 total shares under the warrant
agreement.
As Trans Union elected to continue the agreement, the Company was required
to pay Trans Union an additional cash payment of $752,000 which,
together with the value of the warrant for additional shares which
became exercisable at that time, is being amortized over the remaining
term of the contract.
(11) Major Customers
In 1996, 1995 and 1994, the Company had two major customers who accounted
for more than 10% of rev-
enue. Allstate Insurance Company accounted for revenue of $55,789,000
(20.7%), $53,416,000 (26.4%) and $19,145,000 (12.6%) in 1996, 1995 and
1994, respectively, and Trans Union accounted for revenue of $41,952,000
(15.5%), $25,552,000 (12.6%) and $20,612,000 (13.6%) in 1996, 1995 and
1994, respectively
(12) Foreign Operations
The following table shows financial information by geographic area for the
years 1996, 1995 and 1994.
United United
States Kingdom Consolidated
1996:
Revenue $ 252,190,000 17,712,000 269,902,000
Earnings (loss) before
income taxes 29,634,000 (238,000) 29,396,000
Net earnings (loss) 18,622,000 (399,000) 18,223,000
Total assets 176,321,000 17,728,000 194,049,000
Total tangible assets 169,971,000 10,096,000 180,067,000
Total liabilities
(including deferred
credits) 65,172,000 6,136,000 71,308,000
Total equity 111,149,000 11,592,000 122,741,000
=========== ========== ===========
1995:
Revenue 187,879,000 14,569,000 202,448,000
Earnings (loss) before
income taxes 21,339,000 (1,264,000) 20,075,000
Net earnings (loss) 13,261,000 (856,000) 12,405,000
Total assets 138,180,000 9,990,000 148,170,000
Total tangible assets 131,367,000 7,165,000 138,532,000
Total liabilities
(including deferred
credits) 46,989,000 4,004,000 50,993,000
Total equity 91,191,000 5,986,000 97,177,000
=========== ========== ===========
1994:
Revenue 135,495,000 16,174,000 151,669,000
Earnings (loss) before
income taxes 14,780,000 (1,347,000) 13,433,000
Net earnings (loss) 9,405,000 (1,008,000) 8,397,000
Total assets 113,169,000 10,209,000 123,378,000
Total tangible assets 113,169,000 7,493,000 120,662,000
Total liabilities
(including deferred
credits and redeemable
common stock) 57,883,000 3,599,000 61,482,000
Total equity 55,286,000 6,610,000 61,896,000
=========== ========== ===========
(13) Contingencies
On July 25, 1995, a customer of the Company, Highlights for Children, Inc.
("Highlights"), filed a demand for arbitration with the American
Arbitration Association. The demand alleges, among other things,
breaches of express warranties in connection with a software license
agreement for the Company's GS/2000 software product. The demand seeks
compensatory damages of approximately $22,000,000 and punitive damages
of $44,000,000, plus attorneys' fees and costs.
The Company believes that the action is substantially without merit.
Highlights is and has been using the GS/2000 software in the daily
operation of its business for over three years. Highlights accepted the
software as operational as of September 1, 1993 and paid the final
license fee payment. Acxiom's software license fee and other related
fees invoiced to Highlights for the GS/2000 software totaled
approximately $2,000,000. The Company intends to vigorously defend the
arbitration claim. Management believes that the ultimate outcome of the
arbitration case will result in a final settlement, if any, which would
not be material to the financial statements and which would be
substantially lower than the amount noted above.
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 these matters will not have a
material adverse effect on the Company's consolidated financial position
or its expected future consolidated results of operations.
(14) Dispositions
The Company sold substantially all assets of its mailing services operating
unit, Acxiom Mailing Services ("AMS"), in exchange for the assumption of
$3,045,000 in liabilities, $4,500,000 in cash, a $4,127,000 mortgage
note receivable in monthly installments of $31,000, including interest
at 6.5%, and due in full on May 19, 2001, and $1,000,000 of preferred
stock issued by the buyer. The sale closed May 20, 1994 effective as of
March 31, 1994. The preferred stock is redeemable on May 19, 2004 and
pays quarterly dividends of 5% per annum. The note receivable
($3,931,000 and $4,044,000 at March 31, 1996 and 1995, respectively) and
preferred stock are included in other assets. Additionally, the Company
sold the buyer a non-exclusive, perpetual software license to use
certain of the Company's database marketing and data processing
software. The license fee of $1,550,000 is payable monthly over five
years. Other assets includes license fee receivable of $671,000 and
$895,000 at March 31, 1996 and 1995, respectively. The effect of these
transactions on consolidated net earnings for the year ended March 31,
1994 was not significant. For the year ended March 31, 1994, AMS
revenues were $14,257,000.
Effective June 1, 1994, the Company sold for $500,000 certain U.S. assets
of its BSA operating unit to an entity controlled by an officer and
principal shareholder of the Company. The effect of this transaction on
consolidated net earnings for the year ended March 31, 1995 was not
significant.
(15) Acquisitions
On July 14, 1995, the Company purchased the outstanding stock of Generator
Datamarketing Limited ("Generator"), a U.K. company located in
Herfordshire, near London. Generator provides data and database
marketing software and processing services to its customers. The
purchase price was 4,000,000 pounds sterling (approximately $6,460,000).
The acquisition has been accounted for as a purchase, and, accordingly,
Generator's results of operations are included in the consolidated
statements of earnings as of the purchase date. The purchase price
exceeded the fair value of the net assets acquired by $5,648,000. The
resulting excess of cost over net assets acquired is being amortized
using the straight-line method over its estimated economic life of 15
years.
The pro forma combined results of operations, assuming the acquisition
occurred at the beginning of each period presented, are not materially
different than the historical results of operations reported. Generator
had revenue of $3,122,000 and earnings before income taxes of $215,000
for the year ended December 31, 1994.
On August 25, 1995, the Company acquired all of the outstanding capital
stock of DataQuick Information Systems (formerly an "S" Corporation) and
DQ Investment Corporation (collectively referred to as "DataQuick"). The
Company exchanged 984,839 shares of its common stock for all of the
outstanding shares of capital stock of DataQuick. Additionally, the
Company assumed all of the currently outstanding options granted under
DataQuick's stock option plans, with the result that 808,370 shares of
the Company's common stock are now subject to issuance upon exercise of
such options (see note 6). The acquisition was in the form of a merger
of two wholly-owned subsidiaries of the Company into each of DataQuick
Information Systems and DQ Investment Corporation and is accounted for
as a pooling-of-interests.
DataQuick, headquartered in San Diego, California, provides real property
information to support a broad range of applications including
marketing, appraisal, real estate, banking, mortgage and insurance. This
information is distributed on-line and via CD-ROM, list services, and
microfiche.
The stockholders' equity and operations of DataQuick are not material in
relation to those of the Company. As such, the Company has recorded the
combination by restating stockholders' equity as of April 1, 1995,
without restating prior years' statements of earnings to reflect the
pooling-of-interest combination. DataQuick's net assets as of April 1,
1995 totaled $5,757,000. The statement of earnings for the year ended
March 31, 1996 include the results of DataQuick for the entire period
presented.
For the year ended December 31, 1994, DataQuick had revenues and earnings
before income taxes of $20,251,000 and $891,000, respectively. Included
in the current fiscal year's results are revenue of $8,048,000 and
earnings before income taxes of $79,000 for Data-
Quick for the period from April 1, 1995 to August 25, 1995.
On April 4, 1996, the Company issued approximately 1.7 million shares of
its common stock for all of the outstanding common stock and common
stock options of Pro CD, Inc., headquartered in Danvers, Massachusetts,
a publisher of reference software on CD-ROM. The business combination
will be accounted for as a pooling-of-interests. The stockholders'
equity and operations of Pro CD are not material in relation to those of
the Company. As such, the Company will record the combination by
restating stockholders' equity as of April 1, 1996, without restating
previous statements of earnings to reflect the pooling-of-interests. For
the year ended December 31, 1995, Pro CD had revenues and a net loss of
approximately $21,675,000 and $970,000, respectively. At April 1, 1996
Pro CD's liabilities exceeded its assets by approximately $1,775,000
(unaudited).
Also in April 1996, the Company closed the acquisition of assets of Direct
Media/DMI, Inc. ("DMI") for $25 million and the assumption of certain
liabilities of DMI. The $25 million purchase price is payable in three
years, is collateralized by a letter of credit (see note 4), and may, at
DMI's option, be paid in one million shares of Acxiom common stock in
lieu of cash plus accrued interest. Headquartered in Greenwich,
Connecticut, DMI provides list brokerage, management and consulting
services to business-to-business and consumer list owners and mailers.
At April 1, 1996 the fair value of the net assets acquired of DMI was
approximately $1.6 million (unaudited). The resulting excess of purchase
price over fair value of net assets acquired will be amortized over a 20
year period. The acquisition will be accounted for as a purchase, and
accordingly, the results of operations of DMI will be included in the
consolidated results of operations from the date of its acquisition.
(16) Fair Value of 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, short-term borrowings, and
trade payables - The carrying amount approximates fair value because of
the short maturity of these instruments.
Notes receivable and preferred stock investments - The fair value of these
instruments are estimated by discounting the future cash flows using
the current rate at which similar investments would be made. At December
31, 1995 the estimated fair value of these investments was $5,100,000
(carrying value of $5,602,000).
Long-term debt - The interest rate on the revolving credit agreement is
adjusted for changes in market rates and therefore the carrying value of
the credit agreement 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 December 31, 1995 the estimated fair
value of long-term debt was $30,842,000 (carrying value of $30,751,000).
(17) Selected Quarterly Financial Data (Unaudited)
The table below sets forth selected financial information for each quarter
of the last two years:
1st quarter 2nd quarter 3rd quarter 4th quarter
1996:
Revenue $ 59,182,000 62,376,000 71,315,000 77,029,000
Income from operations 5,517,000 7,342,000 9,532,000 9,267,000
Net earnings 3,136,000 4,072,000 5,812,000 5,203,000
Earnings per share .12 .16 .22 .20
========== ========== ========== ==========
1995:
Revenue 46,881,000 47,853,000 52,742,000 54,972,000
Income from operations 3,712,000 5,354,000 7,437,000 6,562,000
Net earnings 1,516,000 2,793,000 4,121,000 3,975,000
Earnings per share .07 .12 .18 .17
========== ========== ========== ==========
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Acxiom Corporation:
We have audited the accompanying consolidated balance sheets of Acxiom
Corporation and subsidiaries as of March 31, 1996 and 1995, and the related
consolidated statements of earnings, stockholders' equity and cash flows for
each of the years in the three-year period ended March 31, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Acxiom Corporation
and subsidiaries as of March 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the years in the three-year period
ended March 31, 1996, in conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick LLP
Little Rock, Arkansas
May 9, 1996
(This page corresponds with page 44 of the Company's Annual Report.)
Market Information
Per share data is restated to reflect a stock split during fiscal 1995.
Stock Prices
The Company's Common Stock is traded on the national Market System of Nasdaq
under the symbol "ACXM." The following table sets forth for the periods
indicated the high and low closing sale prices of the Common Stock.
Fiscal 1996 High Low
Fourth Quarter $28 $22 1/2
Third Quarter 31 3/4 26
Second Quarter 28 1/4 22 3/4
First Quarter 25 1/4 16 1/4
Fiscal 1995 High Low
Fourth Quarter $18 $13 5/8
Third Quarter 15 13
Second Quarter 14 1/4 10 1/4
First Quarter 11 9 1/4
During the period beginning April 1, 1996, and ending May 15, 1996, the high
closing sales price per share for the Company's Common Stock as reported by
Nasdaq was $27 1/4 and the low closing sales price per share was $26 1/4. On
May 15, 1996, the closing price per share was $27 1/4.
Shareholders of Record
The approximate number of shareholders of record of the Company's Common Stock
as of May 15, 1996, was 1,097.
Dividends
The Company has never paid cash dividends on its Common Stock. The Company
presently intends to retain earnings to provide funds for its business
operations and for the expansion of its business. Thus, it does not anticipate
paying cash dividends in the foreseeable future.
EXHIBIT 21
SUBSIDIARIES OF THE COMPANY
U.S. SUBSIDIARIES
Name Incorporated In Doing Business As
Acxiom CDC, Inc. Arkansas Acxiom CDC, Inc.
Acxiom Children's Center, Inc. Arkansas Acxiom Children's Center,
Inc.
Acxiom/Direct Media, Inc. Arkansas Acxiom/Direct Media
Acxiom Great Lakes Data Center, Inc. Arkansas Acxiom Great Lakes Data
Center, Inc.
Acxiom Leasing Corporation Arkansas Acxiom Leasing Corporation
Acxiom RM-Tools, Inc. Arkansas Acxiom RM-Tools, Inc.
Acxiom Transportation Services, Inc. Arkansas ATS; Conway Aviation, Inc.
BSA, Inc.* New Jersey BSA
DQ Investment Corporation California AccuDat
DataQuick Information Systems, Inc. California DataQuick Information
Systems, Inc.
Pro CD, Inc. Delaware Pro CD
Modern Mailers, Inc.* Delaware Acxiom Mailing Services
U.K. SUBSIDIARIES
Name Incorporated In Doing Business As
Acxiom U.K., Ltd. United Kingdom Acxiom U.K., Ltd.
Generator Datamarketing Limited United Kingdom Generator Datamarketing
Limited
Marketlead Services, Ltd. United Kingdom N/A
(Agency company of Acxiom
U.K., Ltd.)
Southwark Computer Services, Ltd. United Kingdom N/A
(Agency company of Acxiom
U.K., Ltd.)
* Inactive
EXHIBIT 23
The Board of Directors
Acxiom Corporation:
We consent to incorporation by reference in the registration statements (No.
33-17115, No. 33-37609, No. 33-37610, No. 33-42351, No. 33-72310, No. 33-72312,
No. 33-63423 and No. 333-03391 on Form S-8 and No. 33-63431 on Form S-3) of
Acxiom Corporation of our report dated May 9, 1996, relating to the consolidated
balance sheets of Acxiom Corporation and subsidiaries as of March 31, 1996 and
1995, and the related consolidated statements of earnings, stockholders' equity
and cash flows for each of the years in the three-year period ended March 31,
1996 which is incorporated by reference in the March 31, 1996 annual report on
Form 10-K of Acxiom Corporation. We also consent to incorporation by reference
in the above-mentioned registration statements of our report dated May 9, 1996
relating to the consolidated financial statement schedule, which report appears
in the March 31, 1996 annual report on Form 10-K of Acxiom Corporation.
/s/ KPMG Peat Marwick LLP
Little Rock, Arkansas
June 20, 1996
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer of Acxiom
Corporation, a Delaware corporation (the "Company"), does hereby constitute and
appoint Catherine L. Hughes as his true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution for him and in his name,
place and stead, in his capacity as the principal accounting officer of the
Company, to sign the Company's Annual Report on Form 10-K for the year ended
March 31, 1996, together with any amendments thereto, and to file the same,
together with any exhibits and all other documents related thereto, with the
Securities and Exchange Commission, granting to said attorney-in-fact and agent,
full power and authority to do and perform each and any act and thing requisite
and necessary to be done in connection therewith, as fully to all intents and
purposes as the undersigned might or could do in person, duly ratifying and
confirming all that said attorney-in-fact and agent may lawfully do or cause to
be done by virtue of the power herein granted.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
date.
Signature:
/s/ Robert S. Bloom
- ------------------------------
Robert S. Bloom
Date: June 20, 1996
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Acxiom
Corporation, a Delaware corporation (the "Company"), does hereby constitute and
appoint Catherine L. Hughes and/or Robert S. Bloom as her true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution
for her and in her name, place and stead, in her capacity as a director of the
Company, to sign the Company's Annual Report on Form 10-K for the year ended
March 31, 1996, together with any amendments thereto, and to file the same,
together with any exhibits and all other documents related thereto, with the
Securities and Exchange Commission, granting to said attorneys-in-fact and
agents, full power and authority to do and perform each and any act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as the undersigned might or could do in person, duly
ratifying and confirming all that said attorneys-in-fact and agents may lawfully
do or cause to be done by virtue of the power herein granted.
IN WITNESS WHEREOF, the undersigned has hereunto set her hand this
date.
Signature:
/s/ Dr. Ann H. Die
- ----------------------------
Dr. Ann H. Die
Date: June 20, 1996
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Acxiom
Corporation, a Delaware corporation (the "Company"), does hereby constitute and
appoint Catherine L. Hughes and/or Robert S. Bloom as his true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution
for him and in his name, place and stead, in his capacity as a director of the
Company, to sign the Company's Annual Report on Form 10-K for the year ended
March 31, 1996, together with any amendments thereto, and to file the same,
together with any exhibits and all other documents related thereto, with the
Securities and Exchange Commission, granting to said attorneys-in-fact and
agents, full power and authority to do and perform each and any act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as the undersigned might or could do in person, duly
ratifying and confirming all that said attorneys-in-fact and agents may lawfully
do or cause to be done by virtue of the power herein granted.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
date.
Signature:
/s/ William T. Dillard II
- ---------------------------
William T. Dillard II
Date: June 20, 1996
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Acxiom
Corporation, a Delaware corporation (the "Company"), does hereby constitute and
appoint Catherine L. Hughes and/or Robert S. Bloom as his true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution
for him and in his name, place and stead, in his capacity as a director of the
Company, to sign the Company's Annual Report on Form 10-K for the year ended
March 31, 1996, together with any amendments thereto, and to file the same,
together with any exhibits and all other documents related thereto, with the
Securities and Exchange Commission, granting to said attorneys-in-fact and
agents, full power and authority to do and perform each and any act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as the undersigned might or could do in person, duly
ratifying and confirming all that said attorneys-in-fact and agents may lawfully
do or cause to be done by virtue of the power herein granted.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
date.
Signature:
/s/ Harry C. Gambill
- ----------------------------
Harry C. Gambill
Date: June 20, 1996
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and
officer of Acxiom Corporation, a Delaware corporation (the "Company"), does
hereby constitute and appoint Catherine L. Hughes and/or Robert S. Bloom as his
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution for him and in his name, place and stead, in his capacity as
a director and principal financial officer of the Company, to sign the Company's
Annual Report on Form 10-K for the year ended March 31, 1996, together with any
amendments thereto, and to file the same, together with any exhibits and all
other documents related thereto, with the Securities and Exchange Commission,
granting to said attorneys-in-fact and agents, full power and authority to do
and perform each and any act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as the undersigned
might or could do in person, duly ratifying and confirming all that said
attorneys-in-fact and agents may lawfully do or cause to be done by virtue of
the power herein granted.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
date.
Signature:
/s/ Rodger S. Kline
- ----------------------------
Rodger S. Kline
Date: June 20, 1996
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and
officer of Acxiom Corporation, a Delaware corporation (the "Company"), does
hereby constitute and appoint Catherine L. Hughes and/or Robert S. Bloom as his
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution for him and in his name, place and stead, in his capacity as
a director and principal executive officer of the Company, to sign the Company's
Annual Report on Form 10-K for the year ended March 31, 1996, together with any
amendments thereto, and to file the same, together with any exhibits and all
other documents related thereto, with the Securities and Exchange Commission,
granting to said attorneys-in-fact and agents, full power and authority to do
and perform each and any act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as the undersigned
might or could do in person, duly ratifying and confirming all that said
attorneys-in-fact and agents may lawfully do or cause to be done by virtue of
the power herein granted.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
date.
Signature:
/s/ Charles D. Morgan, Jr.
- -----------------------------
Charles D. Morgan, Jr.
Date: June 20, 1996
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Acxiom
Corporation, a Delaware corporation (the "Company"), does hereby constitute and
appoint Catherine L. Hughes and/or Robert S. Bloom as his true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution
for him and in his name, place and stead, in his capacity as a director of the
Company, to sign the Company's Annual Report on Form 10-K for the year ended
March 31, 1996, together with any amendments thereto, and to file the same,
together with any exhibits and all other documents related thereto, with the
Securities and Exchange Commission, granting to said attorneys-in-fact and
agents, full power and authority to do and perform each and any act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as the undersigned might or could do in person, duly
ratifying and confirming all that said attorneys-in-fact and agents may lawfully
do or cause to be done by virtue of the power herein granted.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
date.
Signature:
/s/ Robert A. Pritzker
- ---------------------------
Robert A. Pritzker
Date: June 20, 1996
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Acxiom
Corporation, a Delaware corporation (the "Company"), does hereby constitute and
appoint Catherine L. Hughes and/or Robert S. Bloom as his true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution
for him and in his name, place and stead, in his capacity as a director of the
Company, to sign the Company's Annual Report on Form 10-K for the year ended
March 31, 1996, together with any amendments thereto, and to file the same,
together with any exhibits and all other documents related thereto, with the
Securities and Exchange Commission, granting to said attorneys-in-fact and
agent, full power and authority to do and perform each and any act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as the undersigned might or could do in person, duly
ratifying and confirming all that said attorneys-in-fact and agents may lawfully
do or cause to be done by virtue of the power herein granted.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
date.
Signature:
/s/ Walter V. Smiley
- ---------------------------
Walter V. Smiley
Date: June 20, 1996
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and
officer of Acxiom Corporation, a Delaware corporation (the "Company"), does
hereby constitute and appoint Catherine L. Hughes and/or Robert S. Bloom as his
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution for him and in his name, place and stead, in his capacity as
a director and officer of the Company, to sign the Company's Annual Report on
Form 10-K for the year ended March 31, 1996, together with any amendments
thereto, and to file the same, together with any exhibits and all other
documents related thereto, with the Securities and Exchange Commission, granting
to said attorneys-in-fact and agents, full power and authority to do and perform
each and any act and thing requisite and necessary to be done in connection
therewith, as fully to all intents and purposes as the undersigned might or
could do in person, duly ratifying and confirming all that said
attorneys-in-fact and agents may lawfully do or cause to be done by virtue of
the power herein granted.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
date.
Signature:
/s/ James T. Womble
- -----------------------------
James T. Womble
Date: June 20, 1996