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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
----------------
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED MARCH 31, 1996
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO ___________
COMMISSION FILE NUMBER: 1-11008
CATALINA MARKETING CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 33-0499007
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
11300 9TH STREET NORTH 33716-2329
ST. PETERSBURG, FLORIDA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (813) 579-5000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE ON WHICH
TITLE OF EACH CLASS REGISTERED
---------------------------- ------------------------------
Common Stock, $.01 Par Value New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
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, 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 on the closing price of such stock as of May 30, 1996, as
reported by the New York Stock Exchange, Inc., was $645,205,311. The number of
common shares, par value $0.01 per share, outstanding as of May 30, 1996, was
9,779,672.
DOCUMENTS INCORPORATED BY REFERENCE
Catalina Marketing Corporation Definitive Proxy Statement for 1996--Part III
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TABLE OF CONTENTS
FORM 10-K
PAGE NO.
--------
PART I
Item 1 Business................................................ 1
Item 2 Properties.............................................. 4
Item 3 Legal Proceedings....................................... 4
Item 4 Submission of Matters to a Vote of Security Holders..... 4
PART II
Item 5 Market for Registrant's Common Stock and Related
Stockholder Matters.................................... 4
Item 6 Selected Financial Data................................. 5
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 5
Item 8 Consolidated Financial Statements and Supplementary
Data................................................... 8
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.................... 19
PART III
Item 10 Directors and Executive Officers of the Registrant...... 19
Item 11 Executive Compensation.................................. 19
Item 12 Security Ownership of Certain Beneficial Owners and
Management............................................. 19
Item 13 Certain Relationships and Related Transactions.......... 19
PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports on
Form 8-K............................................... 19
PART I
ITEM 1. BUSINESS
General
Catalina Marketing Corporation (Catalina Marketing, or the "Company"),
through its Catalina Marketing(R) Network, provides manufacturers of consumer
and pharmaceutical products and retailers with a cost-effective method of
delivering advertising messages and promotional incentives directly to
"targeted" consumers based on their purchasing behavior. The Company helps
manufacturers and retailers execute long-term marketing strategies to build
consumer loyalty, promote products, and increase brand awareness and sales.
The Catalina Marketing Network is also used as a mechanism to capture coupon
scan data and electronically clear coupons for participating retailers. The
Company's principal operating units are Catalina Marketing Services, Catalina
Marketing International, Health Resource Publishing, Catalina Electronic
Clearing Services and Catalina Online. There are 577 employees principally in
the U.S. as well as the U.K., France and Mexico.
The Catalina Marketing Network
Catalina Marketing, founded in 1983, developed a proprietary Electronic
Marketing Network designed to utilize the Universal Product Code ("UPC")
labeling convention and the widespread use of UPC scanning technology in
retail stores. The Company developed a technological capability to make coupon
and related promotion delivery more responsive to consumer behavior while
maintaining an advantage in terms of cost efficiency relative to alternative
methods. The Catalina Marketing Network provides manufacturers and retailers
with a high level of consumer targeting precision previously unavailable.
The Company's primary business is the delivery of promotions at the checkout
stand through the Catalina Marketing Network, which links the Company's
software, personal computers, central data bases and specially designed
thermal printers to point of scan controllers and scanning equipment. The
system prints promotion incentives based upon information generated at the
point of sale, from the purchased products' UPC. The Company's system
evaluates scanner data, matches it with manufacturer or retailer programmed
promotions and directs the thermal printer, which is located near the cash
register, to print the appropriate promotion or message. Printing occurs
throughout the checkout process and the promotions are handed directly to the
shopper at the end of the shopping transaction.
The Company enters into agreements with retail chains to install the
Catalina Marketing Network in all or selected stores, either regionally or
nationally. Upon installation, the retailer pays a one-time charge for each
installation and generally agrees to use the Catalina Marketing Network in its
stores for a minimum of five years. The Company pays distribution fees to the
retailer based upon the number of manufacturer coupons printed. The equipment
installed in each retail store includes a thermal printer at each checkout
lane linked by a central personal computer to the retailer's point of scan
controller and scanning equipment. One of the Company's two U.S. hub data
processing facilities will communicate via modem with the personal computer
installed in each store to send new promotional instructions and to retrieve
performance data. The Company contracts with manufacturers and retailers to
print promotions and receives a fee for each promotion distributed.
All of the equipment and supplies necessary for operation of the Catalina
Marketing Network, including computer hardware, printers and paper, are
purchased by the Company from outside sources. The Company currently obtains
most or all of its requirements from one supplier for each of these items
except paper, for which there are at least two major sources. The Company
believes that, as required, alternate sources of supply are available for
these items without material interruptions of the Company's business.
The Catalina Marketing Network's design is flexible and easily upgradable,
and can support new applications developed by the Company. The Network is
driven by proprietary software. The system's flexibility permits the Network
to expand and to evolve as industry or customer requirements change.
The Company, through its majority owned subsidiaries, provides in-store
electronic marketing services for consumers in the United Kingdom, Mexico and
France. As of March 31, 1996, the Company's network was in 558 retail stores
throughout the United Kingdom, Mexico and France.
In fiscal 1994, the Company, through a majority owned subsidiary, Catalina
Electronic Clearing Services, Inc. ("CECS"), began operating a coupon clearing
business. CECS utilizes Catalina Marketing's existing in-store network linked
to scanners manufactured by Spectra-Physics Scanning Systems, Inc. and others
to electronically clear coupons. As retailers scan and validate coupons, CECS
captures the coupon scan data and supplies coupon count and value data to
manufacturers for redemption payment. As of March 31, 1996, the CECS program
is currently in 105 retail stores in the United States.
In fiscal 1995, the Company formed Health Resource Publishing Company
("HRP"), to develop a new application of the Company's patented, in-store
scanner-based technology. This application includes customized newsletters,
targeted to pharmacy customers based on their individual prescription
purchases. The laser-printed publication offers medical condition-specific
health information and savings on related products. The program was in the
test phase during the first half of fiscal 1996. The Health Resource(TM)
newsletter, which measures 8 1/2^ by 14^, is triggered by the National Drug
Code found on all prescription drugs. When a prescription is processed, a
customized newsletter with therapeutically relevant editorials and product
advertising is printed at the pharmacy counter and handed to the customer
along with the customer's filled prescription. As of March 31, 1996 the HRP
newsletter is in 237 stores in the United States.
Services
The majority of services executed on the Catalina Marketing Network are
linked to the core Checkout Coupon(R) application. These include
manufacturers' coupons or other incentives delivered directly to targeted
shoppers based on their purchases of competitive products, the same products
or complementary products. By specifying exactly which UPCs will trigger the
printing of promotions, manufacturers and retailers develop promotions bearing
customized messages and target them directly to shoppers they want to reach.
The Company offers manufacturers and retailers 13 four-week cycles annually
for more than 500 product categories. These product categories are generally
based on standard industry classifications of household and consumer products
available in supermarkets, such as coffee, baby food and frozen entrees. The
purchaser of a particular category is given the exclusive right to have
Checkout Coupons printed for that category for each cycle purchased. The
Company's policy generally is to offer its manufacturer clients a right of
first acceptance, for a limited period of time, to purchase a national
category cycle for each year with respect to the identical category cycle
which was purchased for the immediately preceding year. Categories are
generally purchased nationally, although programs for these contracts can be
developed with regional variations in mind. The Company's U.S. Checkout Coupon
programs generated more than 91 percent of the Company's revenues in the
fiscal year ended March 31, 1996 and 95 percent in each of the fiscal years
ended March 31, 1995, and 1994.
The Company has developed several additional proprietary electronic
marketing products and program enhancements for the Catalina Marketing Network
that, combined with the Checkout Coupon programs, offer a broad range of
products that can satisfy all of the marketing objectives of a consumer goods
company and enable the Company's clients to impact every phase of the purchase
cycle--before, during and after the purchase. For example, the Checkout
Direct(R) program links the Catalina Marketing Network with a retailer's
check-cashing or other card-based shopper program allowing marketers to
monitor the buying patterns of specific households over time and issue
promotions based on those patterns. In addition, the Company actively assists,
implements or otherwise encourages retailer support to supplement manufacturer
Checkout Coupon programs with "tie-ins," such as newspaper advertising,
posters and on-shelf signs.
The Company's main revenue source is a function of total promotions
distributed based on a per-promotion charge, with a minimum category fee
determined with reference to the shopper reach of the Catalina Marketing
Network, and category unit volume. The minimum category fee is generally
payable to the Company prior to the commencement of the purchased cycle.
Redemption of Checkout Coupon incentives is similar to that of regular
manufacturer coupons. Retailers provide discounts to consumers who present
coupons, then send redeemed coupons to clearinghouses and receive
reimbursements for the discounts provided, plus handling fees, from the
manufacturers.
2
Sales and Marketing
Sales Force. The primary focus of the Company's marketing effort is to
attract national consumer product manufacturers to purchase Checkout Coupon
category cycles. The Company's own U.S. sales and client service force of 126
people focuses its services on current and prospective customers by working
with them to develop and execute customized, targeted marketing programs that
fit each brand's strategy and objectives.
Retailer Marketing. The Company's strategy has been to focus its retail
marketing efforts on installing its Network under contracts with the chain
retailers which have stores in major markets throughout the United States
through the Company's retail sales and service force consisting of 186
persons. The Company encourages retailers to use Network-generated incentives
to promote private label brands or high margin departments, and incorporate
third-party "tie-ins."
At March 31, 1996, the Catalina Marketing Network was installed in 9,766
stores in the United States, which reach approximately 127 million shoppers
each week. Outside the United States, the Catalina Marketing Network was
installed in 558 stores, which reach approximately 12.6 million shoppers each
week.
Research and Development
The Company's expenditures for research and development are generally for
market research, software development, system upgrades and pilot-project
execution in order to create, test, and support new applications for the
Catalina Marketing Network. The Company believes that new service and
application development along with market expansion are vital to maintain the
company's continued growth.
Competition
The Company competes for manufacturers' advertising and promotional budgets
with a wide range of alternative media, including television, radio, print and
direct mail advertising, as well as several alternative in-store and point-of-
sale programs. Within the coupon industry, the Company competes with various
traditional coupon delivery methods that are more widely accepted and less
expensive per delivered coupon, including free standing inserts (FSIs),
newspapers, direct mail, magazines and in or on-product packaging, as well as
other "in-store" marketing companies using a variety of coupon delivery
methods. The Company competes for promotional dollars based on the efficiency
and efficacy of the Catalina Marketing Network, its ability to accurately and
effectively target potential customers, the shopper "reach" of its network and
its general ability to influence consumer buying behavior, thereby enabling a
manufacturer or retailer to meet its strategic objectives and measure results
based on units moved versus number of coupons delivered.
Employees
The Company considers its relationship with its employees to be excellent.
The Company employed 577 persons (500 in the U.S.) as of March 31, 1996,
substantially all of whom were full-time employees, and none of whom was
covered by a collective bargaining arrangement. Approximately 38 percent of
the Company's employees are located in the St. Petersburg, Florida
headquarters.
Patents, Proprietary Information and Trademarks
The Company currently holds several United States and foreign patents on
certain aspects of the Catalina Marketing Network and its services and has
several patent applications pending. The Company believes that its patents
provide it with a competitive advantage and plans to defend its proprietary
rights vigorously in all appropriate circumstances. While the Company believes
that its patent position is important, it also believes that its ability to
market its services to retailers and manufacturers, and to develop new
products will be the major factor affecting its future performance.
The Company believes that product recognition is an important competitive
factor in the electronic marketing and promotion industry. Accordingly, the
Company promotes its service marks and trademarks in
3
connection with its marketing activities and has registered, and is in the
process of registering several marks. The Company also regards certain
computer software included in the Catalina Marketing Network and each
additional service application as proprietary and seeks to protect it with
copyrights, trade secret laws and internal non-disclosure agreements and
safeguards, as well as by other means. Such methods may not afford complete
protection and there can be no assurance that others will not independently
develop such know-how, concepts or ideas.
ITEM 2. PROPERTIES
The Company's headquarters facility, which includes its principal
administrative, marketing, management information systems and product
development offices, is located in 44,707 square feet of leased space in St.
Petersburg, Florida. The Company leases an additional 20 sales and support
offices across the United States, consisting of approximately 79,300 square
feet in the aggregate. The Company believes that its existing facilities are
adequate to meet current requirements and that suitable additional space will
be available as needed to accommodate growth of its operations and additional
sales and support offices for the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
Catalina Marketing is often involved in routine litigation incidental to the
normal course of business, including litigation initiated by the Company to
protect its intellectual property. In the opinion of management of Catalina
Marketing, none of this litigation will have a material adverse effect on the
Company's financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
A. Market Prices of Stock
The Company's Common Stock, par value $0.01 per share ("Common Stock"), is
traded on the New York Stock Exchange ("NYSE") under the symbol POS. The
following table sets forth the high and low sales prices as reported by the
NYSE for the Common Stock of the Company for the quarters ended as follows:
HIGH LOW
------- -------
FISCAL 1996:
March 31, 1996........................................... $80 3/4 $58 5/8
December 31, 1995........................................ $64 3/8 $49 1/2
September 30, 1995....................................... $62 $52 3/4
June 30, 1995............................................ $53 3/4 $42 1/4
FISCAL 1995:
March 31, 1995........................................... $55 5/8 $45 1/2
December 31, 1994........................................ $55 7/8 $49 7/8
September 30, 1994....................................... $53 3/4 $41 3/4
June 30, 1994............................................ $48 1/4 $41 1/2
B. Stockholders
As of March 31, 1996, there were approximately 445 registered holders of
Company Common Stock.
4
C. Dividends
The company has not paid any cash dividends to date, and there are no
current plans to pay a cash dividend.
ITEM 6. SELECTED FINANCIAL DATA
SELECTED CONSOLIDATED FINANCIAL DATA
FISCAL YEAR ENDED MARCH 31,
----------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
INCOME STATEMENT DATA:
Revenues................. $ 134,155 $ 113,254 $ 91,448 $ 71,947 $ 51,710
Costs and expenses:
Direct operating ex-
penses................. 47,661 41,389 35,383 27,100 24,510
Selling, general and ad-
ministrative........... 37,358 28,616 26,093 23,266 13,092
Depreciation and amorti-
zation................. 14,328 15,073 11,428 9,266 7,847
---------- ---------- ---------- --------- ---------
Total costs and ex-
penses.................. 99,347 85,078 72,904 59,632 45,449
---------- ---------- ---------- --------- ---------
Income from operations... 34,808 28,176 18,544 12,315 6,261
Net income............... $ 22,028 $ 17,229 $ 12,670 $ 8,229 $ 4,760
Net income per common and
common equivalent
share................... $ 2.21 $ 1.71 $ 1.24 $ .81 $ .51
Weighted average common
and common equivalent
shares
outstanding (in thou-
sands).................. 9,961 10,064 10,194 10,132 9,411
OTHER DATA:
U.S. stores installed at
end of period........... 9,766 9,004 7,481 5,609 4,328
Capital expenditures..... $ 23,561 $ 20,301 $ 25,220 $ 12,183 $ 11,547
BALANCE SHEET DATA:
Cash and cash equiva-
lents................... $ 25,778 $ 30,729 $ 26,863 $ 25,613 $ 6,538
Property and equipment,
net..................... $ 46,253 $ 37,440 $ 32,944 $ 20,424 $ 17,589
Total assets............. $ 114,187 $ 96,556 $ 82,504 $ 60,961 $ 44,420
Long-term debt, including
capital lease obliga-
tions................... -- -- -- -- $ 2,365
Total stockholders' equi-
ty...................... $ 71,222 $ 55,494 $ 44,858 $ 29,337 $ 18,827
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
The Company provides in-store electronic marketing services. Through its
proprietary network, the Company provides consumer products manufacturers and
retailers with cost-effective methods of delivering promotional incentives and
advertising messages directly to consumers based on their purchasing behavior.
These programs offer manufacturers and retailers 13 four-week cycles each year
in which to offer highly targeted product promotions or advertisements
directly to consumers. Manufacturers and retailers may utilize the Catalina
Marketing Network to create and deliver ads and promotions on an exclusive
basis within any one of more than 500 product categories of household and food
products. Revenues from the Checkout Coupon program vary directly with the
total number of coupons printed, subject to minimum category fees which are
set based on the reach of the Catalina Marketing Network and the level of unit
sales within each category. The Catalina Marketing Network is also used as a
mechanism to capture coupon scan data and electronically clear coupons for
participating retailers.
Results of Operations
Year Ended March 31, 1996 compared to Year Ended March 31, 1995
Revenues were $134.2 million in fiscal 1996, up 18.5 percent over revenues
of $113.3 million in fiscal 1995. The increase in revenues is primarily due to
a greater distribution of Checkout Coupon incentives resulting from a larger
number of shopper transactions scanned by the Catalina Marketing Network as
well as increased
5
manufacturer and retailer utilization of the available categories and cycles
in the Catalina Marketing Network. In the U.S., the Catalina Marketing Network
printed 1.95 billion promotions in fiscal 1996, up 11.8 percent compared to
1.75 billion promotions for fiscal 1995. Foreign consolidated subsidiaries,
CECS and HRP contributed approximately $8.6 million and $4.4 million in
revenues in fiscal 1996 and 1995, respectively. These business units are
relatively new and revenue growth is dependent on the rate of rollout and
industry acceptance of the product or service. In the U.S., the Catalina
Marketing Network was in 9,766 stores at March 31, 1996, which reach 127
million shoppers each week as compared to 9,004 stores reaching 120 million
shoppers each week at March 31, 1995.
Direct operating expenses include retailer fees, paper, sales commissions
and the expenses of operating and maintaining the Catalina Marketing Network.
Direct operating expenses increased to $47.7 million for fiscal 1996 from
$41.4 million for fiscal 1995 but decreased as a percent of revenues to 35.5
percent from 36.5 percent, respectively. This percent decrease is due
primarily to economies in paper purchasing.
Selling, general and administrative expenses include personnel-related costs
of sales and administrative staff, overhead and new product development
expenses. Selling, general and administrative expenses increased to $37.4
million in fiscal 1996 from $28.6 million for fiscal 1995 and increased as a
percent of revenues to 27.8 percent from 25.3 percent, respectively. This
increase is due primarily to higher costs associated with a larger sales force
and administrative expenses of new business ventures and products.
Depreciation and amortization decreased to $14.3 million for fiscal 1996
from $15.1 million in fiscal 1995. This decrease is due to the increase in
fully depreciated store equipment in fiscal 1996.
The provision for income taxes increased to $14.9 million, 41 percent of
income before income taxes and minority interest, for fiscal 1996 compared to
$11.3 million, 40.3 percent of income before taxes and minority interest for
fiscal 1995. The Company's effective tax rate is higher than the federal
statutory tax rate due to state and foreign income taxes and the inability to
currently utilize losses of majority owned foreign subsidiaries for tax
purposes.
Year Ended March 31, 1995 compared to Year Ended March 31, 1994
Revenues were $113.3 million in fiscal 1995, up 24 percent over revenues of
$91.4 million in fiscal 1994. The increase in revenues is primarily due to a
greater distribution of Checkout Coupon incentives resulting from a larger
number of shopper transactions scanned by Catalina Marketing Network. In the
U.S., Catalina Marketing Network printed 1.75 billion promotions in fiscal
1995, up 20.1 percent compared to 1.45 billion promotions for fiscal 1994. In
the U.S., the Catalina Marketing Network was in 9,004 stores at March 31,
1995, which reach 120 million shoppers each week as compared to 7,481 stores
reaching 91 million shoppers each week at March 31, 1994.
Direct operating expenses increased to $41.4 million for fiscal 1995 from
$35.4 million for fiscal 1994 but decreased as a percent of revenues to 36.5
percent from 38.7 percent, respectively. This percent decrease is due
primarily to productivity improvements in purchasing and decreased program
testing expenses. In the current year direct expense includes a $1.9 million
charge associated with the testing of a pharmacy program and in the prior year
included a $3.0 million charge associated with the testing of the electronic
coupon clearing program.
Selling, general and administrative expenses increased to $28.6 million for
fiscal 1995 from $26.1 million for fiscal 1994 but decreased as a percent of
revenues to 25.3 percent from 28.5 percent, respectively. This percent
decrease is due primarily to productivity improvements across most Company
departments.
Depreciation and amortization increased to $15.1 million for fiscal 1995
from $11.4 million in fiscal 1994. The higher depreciation and amortization
reflect increased levels of capital expenditures primarily associated with
store equipment, inflation, upgrades and capitalized third-party installation
expenses in the current and prior years.
6
Other income and expense includes income from equipment sales and interest.
Other income decreased to $247,000 expense in fiscal 1995 from $672,000 income
in fiscal 1994. The decrease is due primarily to operating losses from an
unconsolidated equity subsidiary (CIR) owned jointly by the Company and
Information Resources, Inc. In February 1995, CIR's operations were dissolved.
The provision for income taxes increased to $11.3 million, 40.3 percent of
income before income taxes and minority interest, for fiscal 1995 compared to
$7.6 million, 39.7 percent of income before income taxes and minority
interest, for fiscal 1994. The Company's effective tax rate is higher than the
federal statutory tax rate due to state and foreign income taxes and the
inability to currently utilize losses of majority owned foreign subsidiaries
for tax purposes.
Quarterly Results
The following table presents certain unaudited quarterly results for the
last eight quarters, reclassified to conform to the March 31, 1996
presentation (dollars in thousands, except per share data):
THREE MONTHS ENDED
--------------------------------------------------------------------------
MAR 31, DEC 31, SEPT 30, JUNE 30, MAR 31, DEC 31, SEPT 30, JUNE 30,
1996 1995 1995 1995 1995 1994 1994 1994
------- ------- -------- -------- ------- ------- -------- --------
Revenues................ $36,054 $36,546 $30,942 $30,613 $30,783 $30,272 $24,748 $27,451
Direct operating
expenses............... 12,544 13,033 11,142 10,942 11,952 10,629 8,731 10,077
Selling, general and
administrative......... 10,922 10,635 8,140 7,661 9,316 7,805 5,400 6,095
Depreciation and
amortization........... 3,355 3,496 3,582 3,895 3,943 3,727 3,752 3,651
------- ------- ------- ------- ------- ------- ------- -------
Income from operations.. 9,233 9,382 8,078 8,115 5,572 8,111 6,865 7,628
Other income (expense),
net.................... 479 286 435 209 (329) (52) 211 (77)
Provision for income
taxes.................. (4,391) (3,822) (3,277) (3,365) (2,071) (3,329) (2,858) (3,001)
Minority interest....... 282 107 98 179 369 33 6 151
------- ------- ------- ------- ------- ------- ------- -------
Net income.............. $ 5,603 $ 5,953 $ 5,334 $ 5,138 $ 3,541 $ 4,763 $ 4,224 $ 4,701
======= ======= ======= ======= ======= ======= ======= =======
Net income per common
and common equivalent
share.................. $ .55 $ .60 $ .54 $ .52 $ .36 $ .47 $ .42 $ .45
======= ======= ======= ======= ======= ======= ======= =======
Weighted average common
and common equivalent
shares outstanding..... 10,119 9,920 9,864 9,935 9,960 10,134 10,076 10,457
======= ======= ======= ======= ======= ======= ======= =======
U.S. Checkout Coupon
Business:
Stores at quarter end: 9,766 9,465 9,197 9,049 9,004 8,737 8,447 7,916
Stores installed during
quarter: 301 268 148 45 267 290 531 435
Promotions printed (in
millions): 465 549 470 470 469 474 376 429
Weekly shopper reach at
quarter end (in
millions): 127 126 122 122 120 116 110 106
The Company expects its revenues to fluctuate in accordance with periods of
higher promotional activity by manufacturers. The pattern of coupon
distribution, however, is irregular and may change from period to period
depending on many factors, including the economy, competition, the timing of
new product introductions and the timing of manufacturers' promotion planning
and implementation. These factors, as well as the overall growth in the number
of retailer and manufacturer contracts with the Company, tend to influence the
Company's revenues and profits.
Liquidity and Capital Resources
The Company's primary capital expenditures are store equipment and third-
party store installation costs. These amounts generally range from $5,000 to
$13,000 per installed store depending on the size of the store. During fiscal
1996 and 1995, the Company made capital expenditures of $23.6 million and
$20.3 million, respectively, which includes upgrades of previously installed
stores. The increase in the level of capital expenditures for fiscal 1996
resulted primarily from the installation of the Catalina Marketing Network in
additional foreign stores and increased expenditures for data processing
equipment in fiscal 1996 versus fiscal 1995.
7
Catalina Marketing has financed capital expenditures from internally
generated cash flow. Management believes that expenditures for equipment and
research and development will remain above $20 million annually for the
foreseeable future.
CECS pays retailer chains for coupons cleared in their stores within two
weeks of the consumer's purchase. CECS subsequently bills manufacturers based
on electronically scanned and validated data. During fiscal 1996, CECS' net
accounts receivable from manufacturers increased $6 million.
In accordance with coupon industry practice, the Company generally pre-bills
manufacturers prior to the commencement of the purchased category cycle. The
Company recognizes revenue as promotions are printed, and the amounts
collected prior to printing are reflected as deferred revenue, which is
classified in current liabilities. The Company believes working capital
generated by operations is sufficient for its capital requirements, although
the Company may choose to utilize debt and lease financing, if available on
acceptable terms.
During 1996, the Company entered into an unsecured revolving bank credit
facility under which it may borrow up to $30 million. There have been no
borrowings under this credit facility to date.
During 1996 and 1995, the Company purchased $11 million and $9.5 million of
Company Common Stock, respectively. Additionally, management has been
authorized to purchase up to $10 million of Company Common Stock, subject to
market conditions.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX TO FINANCIAL INFORMATION
PAGE
----
Report of Independent Certified Public Accountants.................... 9
Consolidated Statements of Income, Years ended March 31,
1996, 1995 and 1994.................................................. 10
Consolidated Balance Sheets, March 31, 1996 and 1995.................. 11
Consolidated Statements of Stockholders' Equity, Years ended
March 31, 1996, 1995 and 1994........................................ 12
Consolidated Statements of Cash Flows, Years ended March 31,
1996, 1995 and 1994.................................................. 13
Notes to the Consolidated Financial Statements........................ 14
8
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To Catalina Marketing Corporation:
We have audited the accompanying consolidated balance sheets of Catalina
Marketing Corporation (a Delaware corporation) as of March 31, 1996 and 1995,
and the related consolidated statements of income, stockholders' equity and
cash flows for each of the three years in the period ended March 31, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these 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 Catalina
Marketing Corporation as of March 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period
ended March 31, 1996 in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Tampa, Florida,
April 24, 1996
9
CATALINA MARKETING CORPORATION
CONSOLIDATED INCOME STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED MARCH 31,
--------------------------
1996 1995 1994
-------- -------- -------
Revenues........................................... $134,155 $113,254 $91,448
Costs and Expenses:
Direct operating expenses........................ 47,661 41,389 35,383
Selling, general and administrative.............. 37,358 28,616 26,093
Depreciation and amortization.................... 14,328 15,073 11,428
-------- -------- -------
Total costs and expenses....................... 99,347 85,078 72,904
Income From Operations............................. 34,808 28,176 18,544
Other income (expense), net........................ 1,409 (247) 672
-------- -------- -------
Income Before Income Taxes and Minority Interest... 36,217 27,929 19,216
Income Taxes....................................... 14,855 11,259 7,634
Minority Interest in Losses of Subsidiaries........ 666 559 1,088
-------- -------- -------
Net Income....................................... $ 22,028 $ 17,229 $12,670
======== ======== =======
Net Income per Common and Common Equivalent Share.. $ 2.21 $ 1.71 $ 1.24
======== ======== =======
Weighted Average Common and Common Equivalent
Shares Outstanding................................ 9,961 10,064 10,194
======== ======== =======
The accompanying Notes are an integral part of these consolidated financial
statements.
10
CATALINA MARKETING CORPORATION
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
MARCH 31,
------------------
1996 1995
-------- --------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.............................. $ 25,778 $ 30,729
Accounts receivable, net............................... 26,725 17,281
Inventory.............................................. 502 773
Deferred tax asset..................................... 7,436 7,802
Prepaid expenses and other current assets.............. 4,850 820
-------- --------
Total current assets................................. 65,291 57,405
-------- --------
Property and Equipment:
Furniture and office equipment......................... 11,108 5,336
Store equipment........................................ 99,367 81,993
-------- --------
110,475 87,329
Less: accumulated depreciation and amortization........ (64,222) (49,889)
-------- --------
Total property and equipment......................... 46,253 37,440
-------- --------
Other Assets........................................... 2,643 1,711
Total Assets......................................... $114,187 $ 96,556
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable....................................... $ 10,832 $ 6,336
Taxes payable.......................................... 620 226
Accrued expenses....................................... 17,049 17,806
Deferred revenue....................................... 11,960 15,557
-------- --------
Total current liabilities............................ 40,461 39,925
-------- --------
Deferred Tax Liability................................. 2,504 1,137
Commitments and Contingencies..........................
Stockholders' Equity:
Preferred stock; $.01 par value; 5,000,000 authorized
shares; none issued and outstanding................... -- --
Common stock; $.01 par value; 30,000,000 authorized
shares; 10,229,864 and 10,023,655 shares issued at
March 31, 1996 and 1995, respectively................. 102 100
Paid-in capital........................................ 34,182 29,781
Cumulative translation adjustment...................... 501 145
Retained earnings...................................... 56,973 34,945
Less common stock in treasury, at cost (481,900 and
224,000 shares, respectively)......................... (20,536) (9,477)
-------- --------
Total stockholders' equity........................... 71,222 55,494
-------- --------
Total Liabilities and Stockholders' Equity........... $114,187 $ 96,556
======== ========
The accompanying Notes are an integral part of these consolidated financial
statements.
11
CATALINA MARKETING CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
COMMON STOCK TREASURY STOCK
------------- CUMULATIVE --------------- TOTAL
ISSUED PAR PAID-IN TRANSLATION RETAINED STOCKHOLDERS'
SHARES VALUE CAPITAL ADJUSTMENT EARNINGS SHARES AMOUNT EQUITY
------ ----- ------- ----------- -------- ------ -------- -------------
BALANCE AT MARCH 31,
1993................... 9,515 $ 95 $24,196 $-- $ 5,046 -- $ -- $29,337
Proceeds from issuance
of common stock........ 386 4 1,660 -- -- -- -- 1,664
Amortization of option-
related compensation... -- -- 141 -- -- -- -- 141
Tax benefit from
exercise of
non-qualified stock
options and
disqualified
dispositions........... -- -- 3,312 -- -- -- -- 3,312
Common stock
repurchase............. (47) -- (2,269) -- -- -- -- (2,269)
Translation adjustment.. -- -- -- 3 -- -- -- 3
Net income.............. -- -- -- -- 12,670 -- -- 12,670
------ ---- ------- ---- ------- ---- -------- -------
BALANCE AT MARCH 31,
1994................... 9,854 $ 99 $27,040 $ 3 $17,716 -- $ -- $44,858
Proceeds from issuance
of common stock........ 170 1 2,024 -- -- -- -- 2,025
Amortization of option-
related compensation... -- -- 142 -- -- -- -- 142
Tax benefit from
exercise of
non-qualified stock
options and
disqualified
dispositions........... -- -- 575 -- -- -- -- 575
Common stock
repurchase............. -- -- -- -- -- (224) (9,477) (9,477)
Translation adjustment.. -- -- -- 142 -- -- -- 142
Net income.............. -- -- -- -- 17,229 -- -- 17,229
------ ---- ------- ---- ------- ---- -------- -------
BALANCE AT MARCH 31,
1995................... 10,024 $100 $29,781 $145 $34,945 (224) $ (9,477) $55,494
Proceeds from issuance
of common stock........ 206 2 2,655 -- -- -- -- 2,657
Amortization of option-
related compensation... -- -- 133 -- -- -- -- 133
Tax benefit from
exercise of
non-qualified stock
options and
disqualified
dispositions........... -- -- 1,613 -- -- -- -- 1,613
Common stock
repurchase............. -- -- -- -- -- (258) (11,059) (11,059)
Translation adjustment.. -- -- -- 356 -- -- -- 356
Net income.............. -- -- -- -- 22,028 -- -- 22,028
------ ---- ------- ---- ------- ---- -------- -------
BALANCE AT MARCH 31,
1996................... 10,230 $102 $34,182 $501 $56,973 (482) $(20,536) $71,222
====== ==== ======= ==== ======= ==== ======== =======
The accompanying Notes are an integral part of these consolidated financial
statements.
12
CATALINA MARKETING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
FOR THE YEAR ENDED MARCH 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
Cash Flows from Operating Activities:
Net income................................... $ 22,028 $ 17,229 $ 12,670
Adjustments to reconcile net income to net
cash provided by operating activities:
Minority interest.......................... (666) (559) (1,088)
Loss attributable to joint venture......... -- 950 361
Depreciation and amortization.............. 14,461 15,215 11,569
Provision for doubtful accounts............ 1,307 572 134
Deferred income tax........................ 1,733 2,532 (4,539)
Gain on sales of equipment................. (20) (407) (523)
Change in operating assets and liabilities:
Accounts receivable........................ (11,460) (8,184) (3,392)
Inventory, prepaid expenses and other as-
sets...................................... (3,698) 390 473
Accounts payable........................... 7,674 891 (1,235)
Taxes payable.............................. 408 (2,320) 915
Accrued expenses........................... (33) (2,908) 4,784
Deferred revenue........................... (6,382) 5,644 1,977
--------- --------- ---------
Net cash provided by operating activi-
ties.................................... 25,352 29,045 22,106
--------- --------- ---------
Cash Flows From Investing Activities:
Capital expenditures......................... (23,561) (20,301) (25,220)
Proceeds from sale of equipment.............. 440 1,253 1,795
Payment for purchase of stock in unconsoli-
dated equity investment..................... -- (357) (658)
--------- --------- ---------
Net cash used in investing activities.... (23,121) (19,405) (24,083)
--------- --------- ---------
Cash Flows From Financing Activities:
Proceeds from issuance of common and subsidi-
ary stock................................... 2,990 3,063 2,207
Payments for common stock/warrants........... -- -- (2,269)
Tax benefit from exercise of non-qualified
stock options and
disqualified dispositions .................. 1,613 575 3,312
Purchase of minority interest................ (725) -- --
Payment for repurchase of company common
stock....................................... (11,059) (9,477) --
--------- --------- ---------
Net cash provided by (used in) financing
activities.............................. (7,181) (5,839) 3,250
--------- --------- ---------
Net Change in Cash and Cash Equivalents...... (4,950) 3,801 1,273
Effect of Exchange Rate Changes on Cash...... (1) 65 (23)
Cash and Cash Equivalents, at beginning of
year........................................ 30,729 26,863 25,613
--------- --------- ---------
Cash and Cash Equivalents, at end of year.... $ 25,778 $ 30,729 $ 26,863
========= ========= =========
Supplemental Schedule of Other Transactions:
Cash paid during the year for:
Income taxes............................... $ 14,906 $ 10,331 $ 7,895
The accompanying Notes are an integral part of these consolidated financial
statements.
13
CATALINA MARKETING CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following summarizes the significant accounting and financial policies
of Catalina Marketing Corporation and Subsidiaries (the "Company") which have
been followed in preparing the accompanying consolidated financial statements.
Certain prior balances have been reclassified to conform with the current year
presentation.
Description of the Business. The Company provides in-store electronic
marketing services. Through its proprietary network, the Company provides
consumer products manufacturers and retailers with cost-effective methods of
delivering promotional incentives and advertising messages directly to
consumers based on their purchasing behavior. The Company's network is also
used as a mechanism to capture coupon scan data and electronically clear
coupons for participating retailers. As of March 31, 1996, the Company's
network was installed in 9,766 retail stores throughout the United States and
558 retail stores throughout the United Kingdom, Mexico and France.
Principles of Consolidation and Preparation. The consolidated financial
statements include the accounts of the Company and its wholly-owned and
majority-owned subsidiaries. The preparation of financial statements in
conformity with generally accepted accounting principles requires the use of
management's estimates.
The accounts of the majority owned foreign subsidiaries are included as of
December 31, which is their fiscal year end. All material intercompany
profits, transactions and balances have been eliminated. The Company's
investment in non-majority owned companies is accounted for on the equity
method. Other investments are accounted for on the cost method.
Fair Value of Financial Instruments. The book value of all financial
instruments approximates their fair value.
Cash and Cash Equivalents. Cash and cash equivalents consist of cash and
short-term investments. The short-term investments can be immediately
converted to cash and are held at their market value.
Allowance for Doubtful Accounts. The Company records a provision for
estimated doubtful accounts as part of direct operating expenses. As of March
31, 1996 and 1995, the allowance for doubtful accounts was $3,016,000 and
$1,910,000, respectively.
Inventory. Inventory consists of thermal paper used for coupon printing.
Inventory is stated at the lower of cost, as determined by the first-in,
first-out method, or market.
Property and Equipment. Store equipment, furniture and office equipment are
stated at cost. Depreciation of store equipment, furniture and office
equipment is computed using the straight-line method based on the estimated
useful lives of the related assets (generally three to five years). Third
party installation costs, net of amounts reimbursed by the retailer, are
capitalized and amortized using the straight-line method over the shorter of
the estimated useful lives of the assets or the remaining term of the related
retailer contract. Leasehold improvements are amortized using the straight-
line method over the shorter of the estimated useful lives of the assets or
the remaining term of the related lease. Maintenance and repair costs are
expensed as incurred. When assets are retired or sold, the assets and
accumulated depreciation are removed from the respective accounts and any
profit or loss on the disposition is recorded as Other Income.
Foreign Currency Translation. For foreign subsidiaries whose functional
currency is the local foreign currency, balance sheet accounts are translated
at exchange rates in effect at the end of the subsidiaries' year and income
statement accounts are translated at average exchange rates for the year.
Translation gains and losses are included as a separate component of
stockholders' equity.
14
CATALINA MARKETING CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Revenue Recognition and Deferred Revenue. In accordance with coupon industry
practice, the Company generally pre-bills manufacturers for purchased category
cycles. The purchase of a category cycle gives a manufacturer the exclusive
right to have promotions printed for a particular product category during a
four-week cycle. The Company recognizes revenues as promotions are printed.
Amounts collected prior to printing are reflected as deferred revenue until
printing occurs.
Income Taxes. Provision for income taxes includes federal, state and foreign
income taxes currently payable. Deferred income taxes are provided for
temporary differences between the recognition of income and expenses for
financial reporting purposes and income tax purposes.
Research and Development. Research and development costs relating to the
development and testing of new service applications are expensed as incurred.
If a contractual agreement exists to complete a test program that will result
in a loss, the loss is recognized in the period it becomes known.
Net Income Per Common and Common Equivalent Share. Net income per common and
common equivalent share is based on the weighted average number of shares of
common stock outstanding and dilutive common equivalent shares from stock
options using the treasury stock method.
NOTE 2: SUPPLEMENTAL BALANCE SHEET INFORMATION
In 1996 and 1995, other assets include approximately $0.7 and $1.2 million,
respectively of loans to employees. Accrued expenses include (in thousands):
MARCH 31,
---------------
1996 1995
------- -------
Payroll related............................................ $ 7,962 $ 6,759
Property, sales and use tax................................ 2,558 2,603
Sales commissions.......................................... 1,290 1,222
Network development and upgrade............................ 575 607
Relocation and recruiting.................................. 554 689
Legal...................................................... 154 122
Estimated losses on contracts to complete Health Resource
pharmacy tests............................................ -- 1,980
Other...................................................... 3,956 3,824
------- -------
Total accrued expenses................................... $17,049 $17,806
======= =======
NOTE 3: INCOME TAXES
Deferred income tax assets or liabilities are computed based on the
temporary differences between the financial statement and income tax bases of
assets and liabilities using the enacted marginal income tax rate in effect
for the year in which the differences are expected to reverse. Deferred income
tax expenses or credits are based on the changes in the deferred income tax
assets or liabilities from period to period.
15
CATALINA MARKETING CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Temporary differences for financial statement and income tax purposes result
primarily from charges to operations for financial statement reporting
purposes which are not currently tax deductible and revenues deferred for
financial statement reporting purposes which are currently taxable. The
components of the deferred tax asset and liability were as follows (in
thousands):
MARCH 31,
-------------
1996 1995
------ ------
Payroll related............................................... $2,287 $1,915
Deferred revenue.............................................. 1,302 1,961
Provision for doubtful accounts............................... 1,176 745
Network development and upgrade............................... 196 209
Headquarters relocation....................................... 87 314
Other......................................................... 2,388 2,658
------ ------
Deferred tax asset.......................................... $7,436 $7,802
====== ======
Deferred tax liability--depreciation and amortization......... $2,504 $1,137
====== ======
The provision for income taxes consisted of the following (in thousands):
MARCH 31,
-----------------------
1996 1995 1994
------- ------- -------
Current taxes:
Federal........................................... $11,516 $ 7,676 $10,363
State............................................. 1,236 1,038 1,771
Foreign........................................... 370 13 39
------- ------- -------
13,122 8,727 12,173
------- ------- -------
Deferred taxes:
Federal........................................... 1,555 2,193 (4,061)
State............................................. 178 339 (478)
------- ------- -------
1,733 2,532 (4,539)
------- ------- -------
Provision for income taxes........................ $14,855 $11,259 $ 7,634
======= ======= =======
The reconciliation of the provision for income taxes based on the U.S.
statutory federal income tax rate to the Company's provision for income taxes
is as follows (in thousands):
MARCH 31,
------------------------
1996 1995 1994
------- ------- ------
Federal statutory rate........................... 35% 35% 35%
Expected federal statutory tax................... $12,909 $ 9,971 $7,106
State and foreign income taxes, net of federal
benefit......................................... 1,257 576 888
Effect of foreign subsidiary losses.............. 522 250 98
Tax free municipal bonds......................... (332) (187) (228)
Other............................................ 499 649 (230)
------- ------- ------
Provision for income taxes..................... $14,855 $11,259 $7,634
======= ======= ======
16
CATALINA MARKETING CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 4: CREDIT FACILITY
On January 15, 1996, the Company entered into an unsecured revolving bank
credit facility under which it may borrow up to $30 million, at variable rates
calculated with reference to the London Interbank Offering Rate (LIBOR) or the
bank prime rate for certain advances. The credit facility expires August 31,
1997. There have been no borrowings under this credit facility to date.
NOTE 5: COMMITMENTS AND CONTINGENCIES
Rental expense under operating leases was $1,372,000, $1,208,000 and
$963,000 for the years ended March 31, 1996, 1995 and 1994, respectively.
Future minimum rental commitments under operating leases with non-cancelable
terms of more than one year (the longest of which expires in September 2003)
as of March 31, 1996, are as follows: $1,419,000 in 1997, $1,224,000 in 1998,
$1,031,000 in 1999, $657,000 in 2000, $566,000 in 2001 and $1,431,000
thereafter.
One manufacturer accounted for a total of approximately 11 percent and 10
percent of the Company's revenues during the years ended March 31, 1995 and
1994, respectively.
NOTE 6: STOCK OPTION AND STOCK GRANT PLANS
1989 Incentive Stock Option Plan. The 1989 Stock Option Plan (the "1989
Plan") was approved by the Board of Directors in April 1989, and approved by
the stockholders in July 1989. Pursuant to the 1989 Plan, 2,250,000 shares of
the Company's common stock are reserved for issuance upon the exercise of
options granted under the 1989 Plan. Options to purchase an aggregate of
1,817,816 shares have been granted under the 1989 Plan, of which options to
purchase 1,004,544 shares were outstanding on March 31, 1996.
The 1989 Plan provides for grants of Incentive Stock Options ("ISO") to
employees (including employee directors). Options granted under the 1989 Plan
generally become exercisable at a rate of 25 percent per year (20 percent per
year for initial grants to new employees), commencing one year after the date
of grant and generally have terms of five to ten years. In 1994, the 1989 Plan
was amended to limit the term to six years.
The exercise price of all ISOs granted under the 1989 Plan must be equal to
the fair market value of the shares on the date of grant. With respect to any
participant who owns stock possessing more than 10 percent of the voting
rights of the Company's outstanding capital stock, the exercise price of any
stock option granted must equal at least 110 percent of the fair market value
on the date of grant.
Other Stock Options. In April 1991 and July 1993, respectively, consultants
were granted nonqualified options to purchase up to 5,000 and 10,000 shares of
the Company's common stock at an exercise price of $7.00 and $31.00 per share.
The options expire ten years from the date of grant, subject to earlier
termination upon cessation of the consulting services arrangement. At March
31, 1996, 5,000 of those options had been exercised.
Aggregate Stock Option Activity. As of March 31, 1996, options to purchase
an aggregate of 676,100 shares had been exercised, options to purchase an
aggregate 1,014,544 shares were outstanding at a weighted average exercise
price of $41.52 per share and 574,356 shares remained available for future
grants under the 1989 Plan. Of the options outstanding, options to purchase
approximately 308,607 shares were immediately exercisable.
17
CATALINA MARKETING CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
Stock Option activity for the years ended March 31, 1994, 1995 and 1996 is
as follows:
NUMBER RANGE OF
OF SHARES OPTION PRICES
--------- ---------------
Options outstanding at March 31, 1993........... 1,048,075 $ .10 - $38.50
Option activity:
Granted....................................... 82,700 31.00 - 50.38
Exercised..................................... (375,844) .10 - 35.25
Canceled or expired........................... (9,082) 3.80 - 35.25
---------
Options outstanding at March 31, 1994........... 745,849 3.80 - 50.38
Option activity:
Granted....................................... 375,575 42.88 - 51.75
Exercised..................................... (164,150) 3.80 - 41.75
Canceled or expired........................... (42,007) 7.00 - 42.88
---------
Options outstanding at March 31, 1995........... 915,267 7.00 - 51.75
Option activity:
Granted....................................... 380,316 46.25 - 61.00
Exercised..................................... (202,396) 7.00 - 51.00
Canceled or expired........................... (78,643) 7.00 - 55.25
---------
Options outstanding at March 31, 1996........... 1,014,544 7.00 - 61.00
Stock Grant Plan. The Catalina Marketing Corporation 1992 Director Stock
Grant Plan ("Grant Plan") provides for grants of common stock to non-employee
board members.
As of March 31, 1996, 7,393 shares have been granted and 43,707 shares
remained available for future grants under the Grant Plan. Stock granted under
the Grant Plan vests ratably over each Director's remaining term.
Employee Payroll Deduction Stock Purchase Plan (the "Purchase Plan"). In
July 1994, the Purchase Plan was adopted by the Board of Directors and
approved by the stockholders. Pursuant to the Purchase Plan, 150,000 shares of
the Company's common stock were reserved for issuance.
Under the Purchase Plan, employees may purchase Company common stock at 85%
of the market price on the first or last day of an offering period. The
maximum each employee may purchase in an offering period shall not exceed
$12,500 in market value of Company common stock. The Company will typically
have two six-month offering periods each year. The Purchase Plan qualifies
under Section 423 of the Internal Revenue Code of 1986. As of March 31, 1996
and 1995, 11,232 and 5,426 shares had been purchased, respectively.
NOTE 7: 401(K) SAVINGS PLAN
On June 1, 1992, the Company adopted a 401(k) Savings Plan (the "401(k)
Plan"). The Company is required to match employee contributions to the 401(k)
Plan. The match equals 100% of the first 2 percent of compensation the
employee contributes plus 25 percent of employee contributions between 2
percent and 4 percent of the compensation. The Company may also make
discretionary contributions. The Company's contributions during fiscal 1996
and 1995 were $325,000 and $265,000, respectively.
NOTE 8: SUBSEQUENT EVENTS
On April 10, 1996 the Company purchased, from its minority shareholders,
including several employees of the Company and subsidiaries, 46 percent of
Catalina Marketing U.K., Inc. (CMU). As of April 10, 1996, CMU became a wholly
owned subsidiary of the Company.
18
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.
ITEM 11. EXECUTIVE COMPENSATION.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information called for by Items 10, 11, 12 and 13 will be contained in
Catalina Marketing's definitive Proxy Statement for the Annual Meeting of
Stockholders under the captions "Compensation of Directors and Officers During
1996," "Principal Stockholders; Affiliated Transactions" and "Nomination and
Election of Directors" and is incorporated herein by this reference. The
definitive Proxy Statement will be filed with the Commission prior to June 30,
1996.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
PAGE
----
(a)1 Financial Statements. The following is a list of all the
Consolidated Financial Statements included in Item 8 of Part
II.
Report of Independent Certified Public Accountants.............. 9
Consolidated Income Statements, Years Ended March 31, 1996, 1995
and 1994....................................................... 10
Consolidated Balance Sheets at March 31, 1996 and 1995.......... 11
Consolidated Statements of Stockholders' Equity, Years Ended
March 31, 1996, 1995 and 1994.................................. 12
Consolidated Statements of Cash Flows, Years Ended March 31,
1996, 1995 and 1994............................................ 13
Notes to the Consolidated Financial Statements.................. 14
(a)2 Financial Statement Schedules.
All schedules are omitted because they are not applicable or not
required, or because the required information is included in
the Consolidated Financial Statements or notes thereto.
19
(a)3Index to Exhibits
EXHIBIT NO. DESCRIPTION OF DOCUMENT
----------- -----------------------
*3.3 Restated Certificate of Incorporation
*3.4 Restated Bylaws
**10.4 Amended and Restated 1989 Stock Option Plan, a copy of which is
attached as an exhibit to the Company's Annual Report on Form 10-K
for the year ended March 31, 1994.
*10.12 Form of Director and Officer Indemnification Agreement
**10.18 Lease Agreement dated as of June 30, 1993 by and between QP One
Corporation, a Minnesota corporation, as landlord, and Registrant,
as tenant, a copy of which is attached as an exhibit to the
Company's Annual Report on Form 10-K for the year ended March 31,
1994.
**10.18.1 First Amendment dated as of December 20, 1993, to the Lease
Agreement dated as of June 30, 1993, by and between QP One
Corporation, a Minnesota corporation, as landlord, and Registrant,
as tenant, a copy of which is attached as an exhibit to the
Company's Annual Report on Form 10-K for the year ended March 31,
1994.
**10.21 1992 Director Stock Grant Plan, a copy of which is attached as an
exhibit to the Company's Annual Report on Form 10-K for the year
ended March 31, 1994.
**10.22 Employee Payroll Deduction Stock Purchase Plan, a copy of which is
attached as an exhibit to the Company's Annual Report on Form 10-K
for the year ended March 31, 1995.
**10.23 Credit Agreement dated as of January 15, 1996, by and between the
Registrant and SunTrust Bank, Tampa Bay, a copy of which is
attached as an exhibit to the Company's Report on Form 10-Q for
the quarter ended December 31, 1995.
21 List of subsidiaries.
23 Consent of independent certified public accountants
27 Financial Data Schedule
- --------
* Incorporated by reference to the Company's Registration Statement on Form S-
1 Registration No. 33-45732, originally filed with the Securities and
Exchange Commission on February 14, 1992, and declared effective (as
amended) on March 26, 1992.
** Previously filed as indicated.
(b) Reports on Form 8-K:
None.
20
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 BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF ST.
PETERSBURG, STATE OF FLORIDA, ON MAY 16, 1996.
Catalina Marketing Corporation
(Registrant)
By: /s/ Philip B. Livingston
-----------------------------------
PHILIP B. LIVINGSTON,
SENIOR VICE PRESIDENT AND CHIEF
FINANCIAL OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATES INDICATED.
SIGNATURE CAPACITY DATE
/s/ Tommy D. Greer Chairman of the 5/30/96
- ------------------------------------ Board
TOMMY D. GREER
/s/ George W. Off Chief Executive Officer, 5/30/96
- ------------------------------------ President, and Director
GEORGE W. OFF (Principal Executive and
Operating Officer)
/s/ Frederick W. Beinecke Director 5/30/96
- ------------------------------------
FREDERICK W. BEINECKE
/s/ Stephen I. D'Agostino Director 5/30/96
- ------------------------------------
STEPHEN I. D'AGOSTINO
/s/ Thomas G. Mendell Director 5/30/96
- ------------------------------------
THOMAS G. MENDELL
/s/ Helene Monat Director 5/30/96
- ------------------------------------
HELENE MONAT
/s/ Frank H. Barker Director 5/30/96
- ------------------------------------
FRANK H. BARKER
/s/ Michael B. Wilson Director 5/30/96
- ------------------------------------
MICHAEL B. WILSON
/s/ Patrick W. Collins Director 5/30/96
- ------------------------------------
PATRICK W. COLLINS
/s/ Thomas W. Smith Director 5/30/96
- ------------------------------------
THOMAS W. SMITH
/s/ Robert A. Busch Corporate Controller and 5/30/96
- ------------------------------------ Principal Accounting
ROBERT A. BUSCH Officer
/s/ Philip B. Livingston Senior Vice President and 5/30/96
- ------------------------------------ Chief Financial Officer
PHILIP B. LIVINGSTON
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