ACXM Acxiom Holdngs (delisted)

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