ACXM Acxiom Holdngs (delisted)

Acxiom Corporation (Nasdaq: ACXM) today reported fourth-quarter and full-year financial results for fiscal 2006 ended March 31, 2006. Fourth-quarter results include revenue of $344.3 million, income from operations of $44.6 million, diluted earnings per share of $.26, operating cash flow of $74.2 million and free cash flow of $52.5 million. Full 2006 fiscal-year results include revenue of $1.333 billion, income from operations of $131.1 million and diluted earnings per share of $.71. These results include the impact of net pre-tax charges of $15.8 million described in our second quarter earnings release, which reduced diluted EPS by $.12. Operating cash flow for the year was $275.8 million and free cash flow was $201.8 million, both record results. 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. The Company will reference presentation slides that will be available on the website prior to the call. "We have accomplished what we said we would after a challenging first quarter of the fiscal year," Company Leader Charles D. Morgan said. "We met or exceeded all of our fiscal year Financial Road Map targets for total company performance and U.S. results. International revenue results for the year were at the high end of the revised Road Map range that we set after Q1 and exceeded the adjusted operating margin target for the full year that we set after Q3 results. Our cash flow reached a record level, we have an impressive list of new contracts and the committed pipeline is promising. Based on our team's execution of the strategies for the business, we are confident that the revenue and earnings will be in line with the fiscal 2007 projections in the Financial Road Map." Fourth-quarter highlights: -- Revenue of $344.3 million, a 7 percent increase over $322.5 million in the fourth quarter of fiscal 2005. -- U.S. revenue of $295.8 million, a 10 percent increase over $269.8 million in the fourth quarter of fiscal 2005. -- International profit margin of 7% compared to negative 1% in the fourth quarter a year ago. -- Income from operations of $44.6 million, a 94 percent increase from $23.0 million the year before. -- Diluted earnings per share of $.26, up 63 percent from $.16 in the same period a year ago. -- Operating cash flow of $74.2 million and free cash flow of $52.5 million. The free cash flow of $52.5 million is a non-GAAP financial measure, and a reconciliation to the comparable GAAP measure, operating cash flow, is attached to this press release. -- New contracts that are expected to deliver $20 million in annual revenue and renewals that total $64 million in annual revenue. -- Committed new deals in the pipeline that are expected to generate $61 million in annual revenue. Morgan noted that Acxiom recently completed contracts with General Motors, U.S. Bancorp, LaSalle Bank, Deluxe Corporation, SunTrust Banks, Inc., PRIMEDIA Inc., Columbian Chemicals Company, TransUnion and Safety-Kleen Systems, Inc. Fiscal 2006 highlights: -- Revenue of $1.333 billion, up 9 percent from $1.223 billion a year ago, an increase of $110 million in annual revenue. -- U.S. revenue of $1.148 billion, up 14% from $1.011 billion a year ago, an increase of $137 million. -- Diluted earnings per share of $.71, down 4 percent from $.74 in fiscal 2005. Fiscal 2006 earnings include the impact of net pre-tax charges of $15.8 million in the second quarter, which reduced diluted EPS by $.12. -- Operating cash flow of $275.8 million and free cash flow of $201.8 million, both record performances for Acxiom. -- New contracts that are expected to deliver $128 million in annual revenue and renewals that total $149 million in annual revenue. Total contract value for the new contracts completed in the fiscal year is $458 million, while total contract value for renewals is $410 million. -- The acquisition of Digital Impact, a leading provider of integrated digital marketing solutions, based in San Mateo, California. -- 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. -- A technology and distribution agreement with EMC Corporation that includes $30 million from EMC to purchase the grid operating system developed by Acxiom and license certain other grid-related software. -- The purchase of 12.1 million shares of Acxiom stock through the company's stock buy-back program at a total cost of $231.5 million. From the program's introduction in December 2002 through March 31, 2006, the Company has purchased a total of 21.2 million shares of Acxiom stock at a total cost of $390.2 million. Fiscal 2006 Recognition In fiscal 2006, Acxiom: -- Received the prestigious 21st Century Achievement Award from the Computerworld Honors Foundation for positive contributions to the global information technology revolution with the development and delivery of its grid-based Customer Information Infrastructure (CII). -- Was named one of the "Best Places to Work in Information Technology" by Computerworld magazine, the fourth time the company has been ranked in the top 100 work environments for technology professionals. -- Was named one of the top 30 providers of financial technology applications in the "FinTech 100," a listing of the top technology providers as complied by American Banker and the research firm Financial Insights. -- Was ranked No. 5 for employee productivity in Gartner's list of Top 80 Worldwide IT Vendors. -- Received the Corporate Leadership Award from the Direct Marketing Educational Foundation. -- Saw its Digital Impact business named a "leader" among e-mail service providers in Forrester Research's annual ranking of e-mail marketing service providers ("Leader" is Forrester's highest category). Road Map and Outlook Fiscal 2006 U.S. revenue of $1.148 billion was within the target range of $1.140 billion to $1.160 billion included in the Company's Financial Road Map (December 31, 2005). International revenue of $184.9 million for the year was within the target range of $170 million to $190 million. Adjusted U.S. operating margin of 12.4 percent for fiscal 2006 was at the high end of the target range of 11.5 to 12.5 percent. International margin of 2.5 percent was above the target range of 1 to 2 percent that was projected in the updated Road Map adjusted for third quarter results. Return on Invested Capital for the 2006 fiscal year was 11.4% which is near the mid-point of the fiscal 2006 target range of 11 to 12 percent. Acxiom's current Financial Road Map (March 31, 2006) reflects the Company's current expectations for fiscal year 2007, and the long-term goals reflect expected performance in fiscal 2010. For the fiscal year ended March 31, 2007, the Company estimates that: U.S. revenue will grow 7 percent to 10 percent, the U.S. operating margins will be 14 percent to 15 percent, international revenue will grow 0 percent to 5 percent and international margin will be 2 percent to 4 percent. The financial projections stated today are based on the Company's current expectations and the assumptions and limitations set forth in the Financial Road Map (March 31, 2006). These projections are forward looking, and actual results may differ materially. These projections may be impacted by mergers, acquisitions, divestitures or other business combinations that may be completed in the future as well as the other factors set forth below. Leadership Announcement Morgan today also announced that, effective May 15, 2006, Frank Cotroneo joined Acxiom as chief financial officer. Cotroneo previously has served as CFO for H&R Block and MasterCard International. All financial functions including Finance and Accounting, Investor Relations, Treasury and Corporate Finance will report to Mr. Cotroneo. "We are thrilled to be able to add an executive of the caliber of Frank Cotroneo to Acxiom's senior leadership team," Morgan said. "Frank has served as a public-company CFO, and overseen all aspects of the financial operations of several well-respected companies. The international experience he gained in his four years as regional financial officer for MasterCard in Singapore will be a significant asset given the geographic scope of Acxiom's business." Rodger Kline, who served as the acting chief financial officer in his role as Chief Finance and Administrative Leader during the past 16 months, will continue to serve as a member of the Board of Directors and as Chief Administrative Leader. In this role Mr. Kline will continue to be responsible for administrative processes. Functions for which Mr. Kline will be responsible include hardware and software procurement, facilities and data center support, risk management, internal audit, and physical security & information security. 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 the Company is continuing to experience continued improvement and momentum in financial performance, that we expect that continued focus on expense controls will lead to continued improvement in operating margins, that 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; and 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 the historical seasonality of our business may change; 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 that negatively impact the Company; 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 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 scale, competition, 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 March 31, --------------------------- 2006 2005 --------------------------- Revenue: Services 257,591 235,945 Data 86,752 86,589 ------------- ------------- Total revenue 344,343 322,534 Operating costs and expenses: Cost of revenue Services 198,028 189,864 Data 52,142 54,602 ------------- ------------- Total cost of revenue 250,170 244,466 Selling, general and administrative 50,042 55,113 Gains, losses and nonrecurring items, net (456) - ------------- ------------- Total operating costs and expenses 299,756 299,579 ------------- ------------- Income from operations 44,587 22,955 ------------- ------------- Other income (expense): Interest expense (7,531) (4,302) Other, net 135 2,376 ------------- ------------- Total other income (expense) (7,396) (1,926) ------------- ------------- Earnings before income taxes 37,191 21,029 Income taxes 14,132 6,171 ------------- ------------- Net earnings 23,059 14,858 ============= ============= Earnings per share: Basic 0.27 0.17 ============= ============= Diluted 0.26 0.16 ============= ============= ACXIOM CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Dollars in thousands, except earnings per share) For the Twelve Months Ended March 31, --------------------------- 2006 2005 --------------------------- Revenue: Services 1,012,549 889,675 Data 320,019 333,367 ------------- ------------- Total revenue 1,332,568 1,223,042 Operating costs and expenses: Cost of revenue Services 778,490 697,323 Data 201,950 208,388 ------------- ------------- Total cost of revenue 980,440 905,711 Selling, general and administrative 211,541 196,123 Gains, losses and nonrecurring items, net 9,504 (984) ------------- ------------- Total operating costs and expenses 1,201,485 1,100,850 ------------- ------------- Income from operations 131,083 122,192 ------------- ------------- Other income (expense): Interest expense (28,744) (19,191) Other, net 2,005 3,200 ------------- ------------- Total other income (expense) (26,739) (15,991) ------------- ------------- Earnings before income taxes 104,344 106,201 Income taxes 40,216 36,483 ------------- ------------- Net earnings 64,128 69,718 ============= ============= Earnings per share: Basic 0.73 0.80 ============= ============= Diluted 0.71 0.74 ============= ============= ACXIOM CORPORATION AND SUBSIDIARIES CALCULATION OF EARNINGS PER SHARE (Unaudited) (In thousands, except earnings per share) For the Three Months Ended March 31, --------------------------- 2006 2005 --------------------------- Basic earnings per share: Numerator - net earnings 23,059 14,858 Denominator - weighted-average shares outstanding 86,981 88,216 -------------- ------------ Basic earnings per share 0.27 0.17 ============== ============ Diluted earnings per share: Numerator: Net earnings 23,059 14,858 Interest expense on convertible bonds (net of tax benefit) - 509 -------------- ------------ 23,059 15,367 -------------- ------------ Denominator: Weighted-average shares outstanding 86,981 88,216 Dilutive effect of common stock options, warrants and restricted stock 2,855 3,274 Dilutive effect of convertible debt - 7,351 -------------- ------------ 89,836 98,841 -------------- ------------ Diluted earnings per share 0.26 0.16 ============== ============ ACXIOM CORPORATION AND SUBSIDIARIES CALCULATION OF EARNINGS PER SHARE (Unaudited) (In thousands, except earnings per share) For the Twelve Months Ended March 31, --------------------------- 2006 2005 --------------------------- Basic earnings per share: Numerator - net earnings 64,128 69,718 Denominator - weighted-average shares outstanding 87,557 86,695 -------------- ------------ Basic earnings per share 0.73 0.80 ============== ============ Diluted earnings per share: Numerator: Net earnings 64,128 69,718 Interest expense on convertible bonds (net of tax benefit) - 3,560 -------------- ------------ 64,128 73,278 -------------- ------------ Denominator: Weighted-average shares outstanding 87,557 86,695 Dilutive effect of common stock options, warrants and restricted stock 2,732 3,721 Dilutive effect of convertible debt - 9,030 -------------- ------------ 90,289 99,446 -------------- ------------ Diluted earnings per share 0.71 0.74 ============== ============ ACXIOM CORPORATION AND SUBSIDIARIES REVENUES BY SEGMENT (Unaudited) (Dollars in thousands) For the Three Months Ended March 31, --------------------------- 2006 2005 --------------------------- US Services & Data 295,795 269,848 International Services & Data 48,548 52,686 -------------- ------------ Total Revenue 344,343 322,534 ============== ============ US Supplemental Information: Services & Data Excluding IT Mgmt 206,853 186,613 IT Management Services 88,942 83,235 -------------- ------------ 295,795 269,848 ============== ============ International Supplemental Information: Services & Data Excluding IT Mgmt 48,548 52,686 IT Management Services - - -------------- ------------ 48,548 52,686 ============== ============ ACXIOM CORPORATION AND SUBSIDIARIES REVENUES BY SEGMENT (Unaudited) (Dollars in thousands) For the Twelve Months Ended March 31, --------------------------- 2006 2005 --------------------------- US Services & Data 1,147,641 1,010,514 International Services & Data 184,927 212,528 -------------- ------------ Total Revenue 1,332,568 1,223,042 ============== ============ US Supplemental Information: Services & Data Excluding IT Mgmt 796,506 720,437 IT Management Services 351,135 290,077 -------------- ------------ 1,147,641 1,010,514 ============== ============ International Supplemental Information: Services & Data Excluding IT Mgmt 184,927 212,528 IT Management Services - - -------------- ------------ 184,927 212,528 ============== ============ ACXIOM CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Dollars in thousands) March 31, March 31, 2006 2005 -------------- ------------ Assets ------ Current assets: Cash and cash equivalents $ 7,705 $ 4,185 Trade accounts receivable, net 261,624 250,653 Deferred income taxes 24,587 31,415 Refundable income taxes - 1,345 Other current assets 44,937 46,034 -------------- ------------ Total current assets 338,853 333,632 -------------- ------------ Property and equipment 662,948 581,918 Less - accumulated depreciation and amortization 329,177 258,532 -------------- ------------ Property and equipment, net 333,771 323,386 -------------- ------------ Software, net of accumulated amortization 45,509 57,135 Goodwill 472,401 354,182 Purchased software licenses, net of accumulated amortization 155,518 157,999 Unbilled and notes receivable, excluding current portions 19,139 20,410 Deferred costs, net 112,817 88,851 Data acquisition costs 40,828 48,915 Other assets, net 21,662 15,369 -------------- ------------ $ 1,540,498 $ 1,399,879 ============== ============ Liabilities and Stockholders' Equity ------------------------------------ Current liabilities: Current installments of long-term obligations 93,518 83,005 Trade accounts payable 44,144 63,295 Accrued payroll and related expenses 32,139 27,435 Other accrued expenses 81,428 74,635 Deferred revenue 123,916 115,892 Income Taxes 4,845 - -------------- ------------ Total current liabilities 379,990 364,262 -------------- ------------ Long-term obligations: Long-term debt and capital leases, net of current installments 353,439 104,210 Software and data licenses, net of current installments 22,976 37,494 -------------- ------------ Total long-term obligations 376,415 141,704 -------------- ------------ Deferred income taxes 77,916 79,079 Commitments and contingencies Stockholders' equity: Common stock 10,946 10,440 Additional paid-in capital 677,026 588,156 Unearned stock-based compensation (1,941) - Retained earnings 410,278 363,556 Accumulated other comprehensive loss 2,205 12,616 Treasury stock, at cost (392,337) (159,934) -------------- ------------ Total stockholders' equity 706,177 814,834 -------------- ------------ $ 1,540,498 $ 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 Qtr ended Qtr ended Yr ended 6/30/2005 9/30/2005 12/31/2005 3/31/2006 3/31/2006 Net cash provided by operating activities 61,476 44,785 95,414 74,158 275,833 Proceeds received from disposition of assets - 3,613 1,510 - 5,123 Capitalized software (5,673) (5,809) (5,204) (5,217) (21,903) Cash collected from sale of software - - 20,000 - 20,000 Capital expenditures (2,929) (3,025) (401) (493) (6,848) Deferral of costs (16,192) (18,703) (19,603) (15,956) (70,454) --------------------------------------------------- Free cash flow 36,682 20,861 91,716 52,492 201,751 =================================================== ACXIOM CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in thousands) For the Three Months Ended March 31, --------------------------- 2006 2005 --------------------------- Cash flows from operating activities: Net earnings 23,059 14,858 Non-cash operating activities: Depreciation and amortization 58,787 55,204 Loss (gain) on disposal or impairment of assets, net (346) (361) Deferred income taxes (2,403) 3,232 Tax benefit of stock options and warrants 19,097 9,043 Non-cash stock compensation expense 345 3,595 Changes in operating assets and liabilities: Accounts receivable (7,324) (21,540) Other assets (4,450) (19,367) Accounts payable and other liabilities (9,043) 1,013 Deferred revenue (3,564) 22,076 -------------- ------------ Net cash provided by operating activities 74,158 67,753 -------------- ------------ Cash flows from investing activities: Capitalized software (5,217) (5,760) Capital expenditures (493) (4,562) Deferral of costs (15,956) (17,203) Payments received from investments 905 235 Net cash paid in acquisitions (117) (18,612) -------------- ------------ Net cash used by investing activities (20,878) (45,902) -------------- ------------ Cash flows from financing activities: Proceeds from debt 14,746 86,346 Payments of debt (91,079) (93,566) Dividends paid (4,338) (4,290) Sale of common stock 27,007 5,776 Acquisition of treasury stock (1,905) (33,551) -------------- ------------ Net cash used by financing activities (55,569) (39,285) -------------- ------------ Effect of exchange rate changes on cash 88 (275) -------------- ------------ Net increase in cash and cash equivalents (2,201) (17,709) Cash and cash equivalents at beginning of period 9,906 21,894 -------------- ------------ Cash and cash equivalents at end of period 7,705 4,185 ============== ============ Supplemental cash flow information: Cash paid during the period for: Interest 9,553 7,064 Income taxes 4,561 385 Payments on capital leases and installment payment arrangements 18,342 11,241 Payments on software and data license liabilities 5,459 5,151 Noncash investing and financing activities: Software licenses and maintenance acquired under software obligation 6,570 1,200 Acquisition of property and equipment under capital lease and installment payment arrangements 14,884 24,268 Construction of assets under construction loan 3,572 3,853 ============== ============ ACXIOM CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in thousands) For the Twelve Months Ended March 31, --------------------------- 2006 2005 --------------------------- Cash flows from operating activities: Net earnings 64,128 69,718 Non-cash operating activities: Depreciation and amortization 231,137 195,120 Loss (gain) on disposal or impairment of assets, net (1,797) (411) Deferred income taxes 9,998 34,165 Tax benefit of stock options and warrants 19,097 9,043 Non-cash stock compensation expense 1,313 3,595 Changes in operating assets and liabilities: Accounts receivable (21,162) (44,286) Other assets (26,197) (21,898) Accounts payable and other liabilities (6,253) (22,461) Deferred revenue 5,569 24,429 ------------- ------------ Net cash provided by operating activities 275,833 247,014 ------------- ------------ Cash flows from investing activities: Disposition of operations 4,844 - Sale of assets 5,123 - Capitalized software (21,903) (20,294) Capital expenditures (6,848) (14,330) Cash collected from the sale of software 20,000 - Deferral of costs (70,454) (53,428) Payments received from investments 3,760 2,533 Net cash paid in acquisitions (144,626) (42,200) ------------- ------------ Net cash used by investing activities (210,104) (127,719) ------------- ------------ Cash flows from financing activities: Proceeds from debt 437,868 216,138 Payments of debt (307,120) (311,350) Dividends paid (17,406) (14,649) Sale of common stock 58,616 43,984 Acquisition of treasury stock (233,770) (63,759) ------------- ------------ Net cash used by financing activities (61,812) (129,636) ------------- ------------ Effect of exchange rate changes on cash (397) 171 ------------- ------------ Net increase in cash and cash equivalents 3,520 (10,170) Cash and cash equivalents at beginning of period 4,185 14,355 ------------- ------------ Cash and cash equivalents at end of period 7,705 4,185 ============= ============ Supplemental cash flow information: Cash paid (received) during the period for: Interest 27,958 20,473 Income taxes 4,185 1,465 Payments on capital leases and installment payment arrangements 72,232 60,886 Payments on software and data license liabilities 29,069 24,748 Noncash investing and financing activities: Issuance of stock options and warrants for acquisitions 7,541 1,833 Software licenses and maintenance acquired under software obligation 14,950 13,882 Acquisition of property and equipment under capital lease and installment payment arrangements 85,261 90,627 Construction of assets under construction loan 10,772 21,832 ============= ============ ACXIOM CORPORATION AND SUBSIDIARIES SUMMARIZED SUPPLEMENTAL CASH FLOW INFORMATION (Unaudited) (Dollars in thousands) For the Twelve For the Three Months Ended Months ---------------------------------- Ended March 31, 6/30/05 9/30/05 12/31/05 3/31/06 2006 ---------------------------------- --------- Free cash flow 36,682 20,861 91,716 52,492 201,751 Increase (Decrease) in revolver 259,800 96,665 (66,378)(48,736) 241,351 Debt payments (excluding payments on line of credit) (32,224)(23,729) (27,053)(27,597) (110,603) Sale of common stock 13,527 8,024 10,058 27,007 58,616 Acquisition of treasury stock (160,354)(69,081) (2,430) (1,905) (233,770) Dividends paid (4,432) (4,377) (4,259) (4,338) (17,406) Payments received from investments 721 41 2,093 905 3,760 Proceeds from the disposition of operations - 1,529 3,315 - 4,844 Net cash paid in acquisitions (106,719)(34,807) (2,983) (117) (144,626) Effect of exchange rate changes on cash (297) (53) (135) 88 (397) ---------------------------------- --------- Net increase (decrease) in cash 6,704 (4,927) 3,944 (2,201) 3,520 ================================== ========= ACXIOM CORPORATION Financial Road Map(1) ---------------------- (as of March 31, 2006) Actual Long-Term Years Ending Actual Q4 Target Actual Target Goals March 31, Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal 2005 2006 2006 2006 2007 2010 -------- -------- ------- -------- --------- --------- U.S. Revenue 13% to 8% to 11% Growth 9.0% 9.6% 15% 13.6% 7% to 10% (CAGR) U.S. Revenue $1,140 to $1,230 to $1,011 $296 $1,160 $1,148 $1,260 million million mil million mil - International Revenue -10% to 5% to 8% Growth 152.9% -7.9% -20% -13.0% 0% to 5% (CAGR) International $170 to Revenue $213 $49 $190 $185 $185 to million million mil million $195 mil - U.S. Operating 14% to 16% to Margin 11.3% 13.9% 11.6% 15% 18% Adjusted U.S. 11.5% Operating to Margin 11.3% 13.9% 12.5% 12.4%(3) International Operating 12% to Margin 3.9% 7.0% -1.1% 2% to 4% 15% Adjusted International Operating 1% to Margin 3.9% 7.0% 2% 2.5%(3) Return on 11% to 14% to Assets (2) 9.2% 8.5% 8.5% 13% 17% Adjusted Return on 9% to Assets (2) 9.5%(3) 10% 9.5%(3) Return on Invested 11% to 13% to 16% to Capital (2) 11.0% 11.4%(3) 12% 11.4%(3) 15% 19% Operating Cash $250 to Flow $247 $74 $270 $276 $280 to $320 to million million mil million $300 mil $360 mil Free Cash Flow $160 to $159 $52 $180 $202 $175 to $185 to million million mil million $195 mil $225 mil Revolving $200 to Credit Line $11 $252 $375 $252 less than less than Balance million million mil million $500 mil $500 mil Dividends Per $0.24 to Share $0.17 $0.05 $0.20 $0.20 $0.22 $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 (as of March 31, 2006) 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 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 $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 operating 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) (as of March 31, 2006) ----------------------------- Actual Actual Years Ending March 31, Fiscal 2005 Q4 Fiscal 2006 ----------------------------- U.S. Operating Margin --------------------- U.S. Revenue 1,010,513 295,795 U.S. Operating Income 113,992 41,169 U.S. Operating Income Margin 11.3% 13.9% Gains, losses and nonrecurring items, net 0 0 ValueAct Defense 0 0 Lawsuit Expenses 0 0 ----------------------------- Adjusted U.S. Operating Income (6) 113,992 41,169 Adjusted U.S. Operating Income Margin (6) 11.3% 13.9% ============================= International Operating Margin ------------------------------ International Revenue 212,529 48,548 International Operating Income 8,200 3,419 International Operating Income Margin 3.9% 7.0% Gains, losses and nonrecurring items, net 0 0 ----------------------------- Adjusted International Operating Income (6) 8,200 3,419 Adjusted International Operating Income Margin (6) 3.9% 7.0% ============================= Free Cash Flow -------------- Net cash provided by operating activities 247,014 74,158 Proceeds received from disposition of assets 0 0 Capitalized software (20,294) (5,217) Proceeds received from sale of software 0 0 Capital expenditures (14,330) (493) Deferral of costs (53,428) (15,956) ----------------------------- Free cash flow 158,962 52,492 ============================= ----------------------------- Actual Years Ending Target Fiscal March 31, Fiscal 2006 2006 ----------------------------- U.S. Operating Margin --------------------- U.S. Revenue 1,147,641 U.S. Operating Income 133,072 U.S. Operating Income Margin 11.6% Gains, losses and nonrecurring items, net 6,147 ValueAct Defense 2,216 Lawsuit Expenses 761 ---------- Adjusted U.S. Operating Income (6) 142,196 Adjusted U.S. Operating Income Margin (6) 12.4% ========== International Operating Margin ------------------------------ International Revenue 184,927 International Operating Income (1,991) International Operating Income Margin -1.1% Gains, losses and nonrecurring items, net 6,652 ---------- Adjusted International Operating Income (6) 4,661 Adjusted International Operating Income Margin (6) 2.5% ========== Free Cash Flow -------------- Net cash provided by operating activities 250,000 270,000 275,833 Proceeds received from disposition of assets 0 0 5,123 Capitalized software (20,000) (20,000) (21,903) Proceeds received from sale of software 0 0 20,000 Capital expenditures (15,000) (15,000) (6,848) Deferral of costs (55,000) (55,000) (70,454) --------- -------- ---------- Free cash flow 160,000 to 180,000 201,751 ========= ======== ========== ------------------- ------------------- Years Ending Target Long-Term Goals March 31, Fiscal 2007 Fiscal 2010 ------------------- ------------------- Free Cash Flow -------------- Net cash provided by operating activities 280,000 300,000 320,000 360,000 Proceeds received from disposition of assets 0 0 0 0 Capitalized software (23,000) (23,000) (25,000) (25,000) Proceeds received from sale of software 10,000 10,000 0 0 Capital expenditures (16,000) (16,000) (20,000) (20,000) Deferral of costs (76,000) (76,000) (90,000) (90,000) -------- -------- -------- -------- Free cash flow 175,000 to 195,000 185,000 to 225,000 ======= ======== ======== ======== 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. --------------------------- --------------------------- Actual Actual Fiscal 2005 Q4 Fiscal 2006 --------------------------- --------------------------- --------------------------- --------------------------- Return on Assets (ROA) and Invested Capital Adjusted Adjusted (ROIC)(5) ROA ROA ROIC ROA ROA ROIC ------------- --------------------------- --------------------------- Numerator: Income from operations 122,192 122,192 122,192 131,083 131,083 131,083 Unusual Charges, Net (6) 0 0 0 15,776 15,776 Add implied interest on operating leases (1) 13,903 11,696 ----------------------------- ---------------------------- 122,192 122,192 136,095 131,083 146,859 158,554 ----------------------------- ---------------------------- Denominator: Average total assets (2) 1,321,122 1,321,122 1,321,122 1,549,933 1,549,933 1,549,933 Less average cash (3) (11,858) (8,616) Less average non-interest bearing current liabilities (4) (246,280) (288,063) Plus average present value of operating leases (1) 168,734 135,190 ------------------------------ ---------------------------- 1,321,122 1,321,122 1,231,717 1,549,933 1,549,933 1,388,444 ------------------------------ ---------------------------- Return on invested capital 9.2% 9.2% 11.0% 8.5% 9.5% 11.4% ============================= ============================ ----------------------------------------- Target Fiscal 2006 ----------------------------------------- Return on Assets (ROA) and ROA ROIC -------------------- -------------------- Return on Invested Capital (ROIC)(5) Low High Low High --------------------------- -------------------- -------------------- Numerator: Income from operations 141,000 160,000 141,000 160,000 Unusual Charges, Net (6) 0 0 0 0 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% ==================== ==================== ----------------------------- Actual Fiscal 2006 ----------------------------- Return on Assets (ROA) and Return on Invested Capital (ROIC)(5) Adjusted ROA ROA ROIC ----------------------------- Numerator: Income from operations 131,083 131,083 131,083 Unusual Charges, Net (6) 15,776 15,776 Add implied interest on operating leases (1) 11,696 ----------------------------- 131,083 146,859 158,554 ----------------------------- Denominator: Average total assets (2) 1,549,933 1,549,933 1,549,933 Less average cash (3) (8,616) Less average non-interest bearing current liabilities (4) (288,063) Plus average present value of operating leases (1) 135,190 ----------------------------- 1,549,933 1,549,933 1,388,444 ----------------------------- Return on invested capital 8.5% 9.5% 11.4% ============================= ----------------------------------------- Target Fiscal 2007 ----------------------------------------- Return on Assets (ROA) ROA ROIC and Return on Invested -------------------- -------------------- Capital (ROIC)(5) Low High Low High ------------------------- -------------------- -------------------- Numerator: Income from operations 175,500 196,900 175,500 196,900 Unusual Charges, Net (6) 0 0 0 0 Add implied interest on operating leases (1) 11,000 11,000 -------------------- -------------------- 175,500 196,900 186,500 207,900 -------------------- -------------------- Denominator: Average total assets (2) 1,566,000 1,574,000 1,566,000 1,574,000 Less average cash (3) (10,000) (10,000) Less average non-interest bearing current liabilities (4) (277,000) (288,000) Plus average present value of operating leases (1) 133,000 133,000 -------------------- -------------------- 1,566,000 1,574,000 1,412,000 1,409,000 -------------------- -------------------- Return on invested capital 11% to 13% 13% to 15% ==================== ==================== ----------------------------------------- Long-Term Goals Fiscal 2010 ----------------------------------------- Return on Assets (ROA) ROA ROIC and Return on Invested -------------------- -------------------- Capital (ROIC)(5) Low High Low High ----------------------- -------------------- -------------------- Numerator: Income from operations 268,600 337,600 268,600 337,600 Unusual Charges, Net (6) 0 0 0 0 Add implied interest on operating leases (1) 9,000 9,000 -------------------- -------------------- 268,600 337,600 277,600 346,600 -------------------- -------------------- Denominator: Average total assets (2) 1,864,000 1,965,000 1,864,000 1,965,000 Less average cash (3) (10,000) (10,000) Less average non-interest bearing current liabilities (4) (261,000) (285,000) Plus average present value of operating leases (1) 114,000 114,000 -------------------- -------------------- 1,864,000 1,965,000 1,707,000 1,784,000 -------------------- -------------------- Return on invested capital 14% to 17% 16% to 19% ==================== ==================== 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. Future cash balances above $10.0 million are assumed to be invested at money market rates and are excluded from this operating cash adjustment. 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. *T