NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Description of Business -
Acxiom is a global technology and enablement services company with a vision to power a world where all marketing is relevant. We provide the data foundation for the world's best marketers. By making it safe and easy to activate, validate, enhance, and unify data, we provide marketers with the ability to deliver relevant messages at scale and tie those messages back to actual results. Our products and services enable people-based marketing, allowing our clients to generate higher return on investment and drive better omni-channel customer experiences.
Acxiom is a Delaware corporation founded in 1969 in Conway, Arkansas. Our common stock is listed on the NASDAQ Global Select Market under the symbol "ACXM." We serve a global client base from locations in the United States, Europe, and the Asia-Pacific ("APAC") region. Our client list includes more than 3,000 of the world's largest and best known brands across most major industry verticals, including but not limited to financial, insurance and investment services, automotive, retail, telecommunications, high tech, healthcare, travel, entertainment, non-profit, and government.
Basis of Presentation and Principles of Consolidation -
The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. We have prepared the accompanying consolidated financial statements in accordance with accounting principles generally accepted in the United States of America ("GAAP") as set forth in the Financial Accounting Standards Board's ("FASB") Accounting Standards Codification ("ASC") and we consider the various staff accounting bulletins and other applicable guidance issued by the United States Securities and Exchange Commission.
Use of Estimates -
Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these consolidated financial statements in conformity with GAAP. Estimates are used in determining, among other items, the fair value of acquired assets and assumed liabilities, estimated selling price in certain revenue arrangements, projected cash flows associated with recoverability of assets, restructuring and impairment accruals, litigation and facilities lease loss accruals, amortization of software development costs, and the recognition and measurement of current and deferred income taxes, including the measurement of uncertain tax positions. Actual results could differ from those estimates.
Discontinued Operations -
Discontinued operations comprise those activities that have been disposed of during the period or which have been classified as held for sale at the end of the period, and represent a separate major line of business or geographical area that can be clearly distinguished for operational and financial reporting purposes. In fiscal 2016, the Company sold its IT Infrastructure Management business ("ITO") and began reporting the results of operations, cash flows and the balance sheet amounts pertaining to ITO as a component of discontinued operations in the consolidated financial statements. In fiscal 2015, Acxiom identified its U.K. call center operation, 2Touch, as a component of the Company that is reported as discontinued operations as a result of its disposal. Refer to Note 4, Discontinued Operations, for more information.
Unless otherwise indicated, information in the notes to the consolidated financial statements relates to continuing operations.
Reclassifications -
During the quarter ended June 30, 2015, the Company reviewed its classification of expenses in its statement of operations and made several changes in an effort to bring added transparency to its reporting. As a result of this review, the Company made several changes to the way it classifies operating expenses. Expenses for prior periods have been reclassified to conform to the current-year presentation. The reclassifications had no effect on loss from operations, income (loss) from continuing operations before income taxes, or net earnings (loss). The following is a summary of the reclassifications:
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
Additional categories of operating costs and expenses in the Consolidated Statements of Operations: The Company has segregated research and development costs previously reported as a component of cost of revenue and has separated selling, general and administrative into sales and marketing and general and administrative. In addition, the Company added a gross profit subtotal to its Consolidated Statements of Operations.
Reclassification of operating costs and expenses: The Company previously classified all account management functions (which include activities supporting existing client relationships and managing client service activities, as well as responsibilities for existing client contract extensions and up-sell) and all IT project management activities as cost of revenue. As the Company is now disaggregating its operating results into more granular categories of costs, and as a result of activities during fiscal 2015 to clarify and segregate account management roles between those supporting existing client relationships and those focused on existing contract extensions and upsell and IT project management roles between client-facing and internal projects, certain costs are presented in a new category. Costs supporting contract extension and upsell are now classified as sales and marketing, and internal IT project management costs are now classified as general and administrative. Accordingly, prior years' amounts have been reclassified to conform to the current presentation.
After the reclassifications, operating costs and expenses are now classified in the following categories in the Consolidated Statements of Operations:
·
|
Cost of revenue includes all direct costs of sales such as data and other third party costs directly associated with revenue. Cost of revenue also includes operating expenses for each of the Company's operations functions such as client services, account management, agency, strategy and analytics, IT, data acquisition, and product operations. Finally, cost of revenue includes amortization of internally developed software.
|
·
|
Research and development includes operating expenses for the Company's engineering and product/project management functions supporting research, new development, and related product enhancement. This definition expanded research and development expenses, resulting in an increase in our previously disclosed research and development expenses of $20.3 million in fiscal 2015 and $23.6 million in fiscal 2014.
|
·
|
Sales and marketing includes operating expenses for the Company's sales, marketing, and product marketing functions.
|
·
|
General and administrative represents operating expenses for all corporate functions, including finance, human resources, legal, corporate IT, and the corporate office.
|
The following table summarizes the reclassification activity for the year ended March 31, 2015 (dollars in thousands):
|
|
As previously reported
1
|
|
|
Category expansion
|
|
|
Account management reclass
|
|
|
IT reclass and other
|
|
|
As currently reported
|
|
Cost of revenue
|
|
$
|
639,945
|
|
|
$
|
(74,201
|
)
|
|
$
|
(62,947
|
)
|
|
$
|
(8,760
|
)
|
|
$
|
494,037
|
|
Research and development
|
|
$
|
-
|
|
|
$
|
74,201
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
74,201
|
|
Selling, general and administrative
|
|
$
|
175,050
|
|
|
$
|
(175,050
|
)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Sales and marketing
|
|
$
|
-
|
|
|
$
|
54,807
|
|
|
$
|
62,947
|
|
|
$
|
(1,260
|
)
|
|
$
|
116,494
|
|
General and administrative
|
|
$
|
-
|
|
|
$
|
120,243
|
|
|
$
|
-
|
|
|
$
|
10,020
|
|
|
$
|
130,263
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
Adjusted for discontinued operations
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
The following table summarizes the reclassification activity for the fiscal year ended March 31, 2014 (dollars in thousands):
|
|
As previously reported
1
|
|
|
Category expansion
|
|
|
Account management reclass
|
|
|
IT reclass and other
|
|
|
As currently reported
|
|
Cost of revenue
|
|
$
|
608,861
|
|
|
$
|
(62,807
|
)
|
|
$
|
(34,966
|
)
|
|
$
|
(5,571
|
)
|
|
$
|
505,517
|
|
Research and development
|
|
$
|
-
|
|
|
$
|
62,807
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
62,807
|
|
Selling, general and administrative
|
|
$
|
152,614
|
|
|
$
|
(152,614
|
)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Sales and marketing
|
|
$
|
-
|
|
|
$
|
58,641
|
|
|
$
|
34,966
|
|
|
$
|
-
|
|
|
$
|
93,607
|
|
General and administrative
|
|
$
|
-
|
|
|
$
|
93,973
|
|
|
$
|
-
|
|
|
$
|
5,571
|
|
|
$
|
99,544
|
|
1
Adjusted for discontinued operations
|
|
|
|
|
|
Significant Accounting Policies
Cash and Cash Equivalents -
The Company considers all highly-liquid investments with original maturities of three months or less to be cash equivalents.
Accounts Receivable -
Accounts receivable includes amounts billed to customers as well as unbilled amounts recognized in accordance with the Company's revenue recognition policies, as stated below. Unbilled amounts included in accounts receivable, which generally arise from the delivery of data and performance of services to customers in advance of billings, were $14.3 million at both March 31, 2016 and 2015.
Accounts receivable are presented net of allowance for doubtful accounts. The Company evaluates its allowance for doubtful accounts based on a combination of factors at each reporting date. Each account or group of accounts is evaluated based on specific information known to management regarding each customer's ability or inability to pay, as well as historical experience for each customer or group of customers, the length of time the receivable has been outstanding, and current economic conditions in the customer's industry. Accounts receivable that are determined to be uncollectible are charged against the allowance for doubtful accounts.
Property and Equipment -
Property and equipment are stated at cost. Depreciation and amortization are calculated on the straight-line method over the estimated useful lives of the assets as follows: buildings and improvements, up to 30 years; data processing equipment, 2 - 5 years, and office furniture and other equipment, 3 - 7 years.
Property held under capitalized lease arrangements is included in property and equipment, and the associated liabilities are included in long-term debt. Amortization of property under capitalized leases is included in depreciation and amortization expense. Property and equipment taken out of service and held for sale is recorded at the lower of depreciated cost or net realizable value and depreciation is ceased.
Leases -
Rent expense on operating leases is recorded on a straight-line basis over the term of the lease agreement.
Software, Purchased Software Licenses, and Research and Development Costs –
Costs of internally developed software are capitalized in accordance with ASC 350-40,
Internal Use Software
.
The standard generally requires that research and development costs incurred prior to the beginning of the application development stage of software products are charged to operations as such costs are incurred. Once the application development stage has begun, costs are capitalized until the software is available for general release.
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
Costs of internally developed software are amortized on a straight-line basis over the remaining estimated economic life of the software product, generally two to five years. The Company recorded amortization expense related to internally developed software of $30.7 million, $29.0 million, and $9.7 million for fiscal 2016, 2015 and 2014, respectively. Of the amortization expense recorded in fiscal 2016 and 2015, $10.0 and $7.5 million, respectively, relate to internally developed software acquired as part of the LiveRamp acquisition. Amortization expense in fiscal 2016 and fiscal 2015 also included $1.8 million and $4.3 million, respectively, of accelerated amortization expense resulting from adjusting the remaining lives of certain capitalized software products which the Company will no longer be using as a result of the LiveRamp acquisition.
Costs of purchased software licenses are amortized using a units-of-production basis over the estimated economic life of the license, generally not to exceed five years. The Company recorded amortization expense related to purchased software licenses of $3.8 million, $5.0 million and $4.0 million in 2016, 2015 and 2014, respectively. Some of these licenses are, in effect, volume purchase agreements for software licenses needed for internal use and to provide services to customers over the terms of the agreements. Therefore, amortization lives are periodically reevaluated and, if justified, adjusted to reflect current and future expected usage based on units-of-production amortization.
Capitalized software, including both purchased and internally developed, is reviewed when facts and circumstances indicate the carrying amount may not be recoverable and, if necessary, the Company reduces the carrying value of each product to its fair value.
Goodwill -
As described in Note 17 – Segment Information, during the first quarter of fiscal 2016, the Company changed its organizational structure which resulted in a change of operating segments and reporting units. During the third quarter of fiscal 2016, the Company further expanded its operating segments and reporting units. As a result, goodwill was reallocated to the new reporting units using a relative fair value approach.
Goodwill is measured and tested for impairment on an annual basis in the first quarter of the Company's fiscal year in accordance with ASC 350,
Intangibles—Goodwill and Other
, or more frequently if indicators of impairment exist. Triggering events for interim impairment testing include indicators such as adverse industry or economic trends, restructuring actions, downward revisions to projections of financial performance, or a sustained decline in market capitalization. The performance of the impairment test involves a two-step process. The first step requires comparing the estimated fair value of a reporting unit to its net book value, including goodwill. A potential impairment exists if the estimated fair value of the reporting unit is lower than its net book value. The second step of the impairment test involves assigning the estimated fair value of the reporting unit to its identifiable assets, with any residual fair value being assigned to goodwill. If the carrying value of an individual indefinite-lived intangible asset (including goodwill) exceeds its estimated fair value, such asset is written down by an amount equal to the excess, and a corresponding amount is recorded as a charge to operations for the period in which the impairment test is completed. Completion of the Company's annual impairment test during the quarter ended June 30, 2015 indicated no potential impairment of its goodwill balances.
During the second quarter of fiscal 2016, a triggering event occurred which required the Company to test the recoverability of goodwill associated with its Brazil Marketing Services and Audience Solutions reporting unit. The triggering event was the announced closure of the Company's Brazil operation. In addition to testing the recoverability of goodwill, the Company also tested certain other long-lived assets in this unit for impairment. The results of the impairment testing indicated complete impairment of the goodwill as well as impairment for certain other long-lived assets. The amount of impairment was $0.7 million, of which $0.5 million was goodwill and $0.2 million related to other long-lived assets, primarily property and equipment.
During the third quarter of fiscal 2016, management determined that results for the APAC component were lower than had been projected in the previous goodwill test in part due to an economic slowdown in Asia. Management further determined that the failure of the APAC component to meet expectations, combined with the expectation that future projections would also be lowered, constituted a triggering event, requiring an interim goodwill impairment test. The impairment test indicated a reduced fair value, but the fair value was still in excess of the carrying value resulting in no impairment.
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
During the fourth quarter of fiscal 2016, a triggering event occurred which required the Company to test the recoverability of goodwill associated with its APAC Marketing Services and Audience Solutions reporting units. The triggering event was the Company's decision to focus efforts in Australia exclusively on the Connectivity business; as a result, the Company plans to wind-down the Marketing Services and Audience Solutions operations in Australia. In addition to testing the recoverability of goodwill, the Company also tested certain other long-lived assets in these units for impairment. The results of the two-step test indicated complete impairment of the APAC Audience Solutions goodwill as well as impairment for certain other long-lived assets. The amount of impairment was $6.1 million, of which $5.4 million was goodwill and $0.7 million related to other long-lived assets, primarily property and equipment. The impairment test also indicated a reduced fair value for the APAC Marketing Services component, but the fair value was still in excess of the carrying value resulting in no impairment. Management believes that the estimated valuations it arrived at were reasonable and consistent with what other marketplace participants would use in valuing the APAC components. However, management cannot give any assurances that the values will not change in the future. For example, if the APAC projections are not achieved in the future or if there are strategic changes related to the reporting unit, this could lead management to reassess their assumptions and lead to reduced valuations under the income approach. The Company continues to monitor potential triggering events including changes in the APAC business climate, the volatility of the APAC capital markets, and APAC operating performance and projections. The occurrence of one or more triggering events could require additional impairment testing, which could result in impairment charges.
In order to estimate the fair value for each of the components, management uses an income approach based on a discounted cash flow model together with valuations based on an analysis of public company market multiples and a similar transactions analysis.
The key assumptions used in the discounted cash flow valuation model include discount rates, growth rates, cash flow projections and terminal value rates. Discount rates, growth rates and cash flow projections are the most sensitive and susceptible to change as they require significant management judgment. Discount rates are determined by using a weighted average cost of capital ("WACC"). The WACC considers market and industry data as well as company-specific risk factors for each reporting unit in determining the appropriate discount rate to be used. The discount rate utilized for each reporting unit is indicative of the return an investor would expect to receive for investing in such a business. Management, considering industry and company-specific historical and projected data, develops growth rates and cash flow projections for each reporting unit. Terminal value rate determination follows common methodology of capturing the present value of perpetual cash flow estimates beyond the last projected period assuming a constant WACC and low long-term growth rates.
The public company market multiple method is used to estimate values for each of the components by looking at market value multiples to revenue and EBITDA (earnings before interest, taxes, depreciation and amortization) for selected public companies that are believed to be representative of companies that marketplace participants would use to arrive at comparable multiples for the individual component being tested. These multiples are then used to develop an estimated value for each respective component.
The similar transactions method compares multiples based on acquisition prices of other companies believed to be those that marketplace participants would use to compare to the individual component being tested. Those multiples are then used to develop an estimated value for that component.
In order to arrive at an estimated value for each component, management uses a weighted-average approach to combine the results of each analysis. Management believes that using multiple valuation approaches and then weighting them appropriately is a technique that a marketplace participant would use.
As a final test of the annual valuation results, the total of the values of the components is reconciled to the actual market value of Acxiom common stock as of the valuation date. Management believes this control premium is reasonable compared to historical control premiums observed in actual transactions.
During fiscal 2015, we did not recognize any goodwill impairment losses.
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
During fiscal 2014, triggering events occurred which required the Company to test the recoverability of goodwill associated with its European reporting unit and its 2Touch reporting unit (which is now included in discontinued operations). The triggering event was the initiation of a restructuring of the European unit. The restructuring included exiting the analog paper survey business in Europe. The triggering event related to 2Touch was a potential exit from that business. In addition to testing the recoverability of goodwill, the Company also tested certain other long-lived assets in those units for impairment. In the case of 2Touch, the step one fair value indicated that all of the goodwill and other long-lived assets were impaired. Therefore there was no need to perform detailed step two calculations in order to conclude that all of the goodwill and other long-lived assets of this unit should be written off. In the case of the European unit, the Company first tested certain data assets within the unit, and concluded that $4.6 million of these data assets were impaired and should be written off. Then the Company performed step one of the two-step goodwill test, which indicated the goodwill was impaired. Step two of the goodwill recoverability test required the Company to perform a hypothetical purchase price allocation, under which the estimated fair value was allocated to the unit's tangible and intangible assets based on their estimated fair values. This hypothetical purchase price allocation indicated that all of the unit's goodwill should be written off. The amount of impairment for the European unit was $25.0 million, of which $20.3 million was goodwill and $4.6 million related to data assets. The amount of impairment for the 2Touch unit was $3.9 million, of which $3.0 million was goodwill and $0.9 million was other assets, primarily property and equipment.
Management believes that the estimated valuations it arrived at are reasonable and consistent with what other marketplace participants would use in valuing the Company's components. However, management cannot give any assurance that these market values will not change in the future. For example, if discount rates demanded by the market increase, this could lead to reduced valuations under the income approach. If the Company's projections are not achieved in the future, this could lead management to reassess their assumptions and lead to reduced valuations under the income approach. If the market price of the Company's stock decreases, this could cause the Company to reassess the reasonableness of the implied control premium, which might cause management to assume a higher discount rate under the income approach which could lead to reduced valuations. If future similar transactions exhibit lower multiples than those observed in the past, this could lead to reduced valuations under the similar transactions approach. And finally, if there is a general decline in the stock market and particularly in those companies selected as comparable to the Company's components, this could lead to reduced valuations under the public company market multiple approach. The Company's next annual impairment test will be performed during the first quarter of fiscal 2017. The fair value of the Company's components could deteriorate which could result in the need to record impairment charges in future periods. The Company continues to monitor potential triggering events including changes in the business climate in which it operates, attrition of key personnel, the volatility in the capital markets, the Company's market capitalization compared to its book value, the Company's recent operating performance, and the Company's financial projections. The occurrence of one or more triggering events could require additional impairment testing, which could result in impairment charg
es.
Impairment of Long-lived Assets -
Long-lived assets and certain identifiable intangibles are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company considers factors such as operating losses, declining outlooks, and business conditions when evaluating the necessity for an impairment analysis. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the undiscounted cash flows expected to result from the use and eventual disposition of the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.
During fiscal 2016, in conjunction with the goodwill impairment tests noted above, the Company also tested certain other long-lived assets in the affected units for impairment. The Company recorded impairment charges of $0.9 million related to other long-lived assets, primarily property and equipment.
There were no impairment charges during fiscal 2015.
During fiscal 2014, in conjunction with the goodwill impairment test noted above, the Company also tested certain database assets and other long-lived assets in the affected units for impairment. The Company recorded impairment charges of $4.6 million related to data assets and $0.9 million related to other long-lived assets (see note 6).
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
Data Acquisition Costs -
The Company defers certain costs related to the acquisition or licensing of data for the Company's proprietary databases which are used in providing data products and services. These costs are amortized over the useful life of the data, which is from two to seven years. In order to estimate the useful life of any acquired data, the Company considers several factors including 1) the type of data acquired, 2) whether the data becomes stale over time, 3) to what extent the data will be replaced by updated data over time, 4) whether the stale data continues to have value as historical data, 5) whether a license places restrictions on the use of the data, and 6) the term of the license.
Deferred Revenue -
Deferred revenue consists of amounts billed in excess of revenue recognized. Deferred revenues are subsequently recorded as revenue in accordance with the Company's revenue recognition policies.
Revenue Recognition -
The Company's policy follows the guidance from ASC 605,
Revenue Recognition
.
The Company provides marketing database services under long-term arrangements. These arrangements may require the Company to perform setup activities such as the design and build of a database, and may include other products and services purchased at the same time, or within close proximity of one another (referred to as multiple element arrangements). Each element within a multiple element arrangement is accounted for as a separate unit of accounting provided the following criteria are met: the delivered products or services have value to the customer on a standalone basis; and for an arrangement that includes a general right of return relative to the delivered products or services, delivery or performance of the undelivered product or service is considered probable and is substantially controlled by us. We consider a deliverable to have standalone value if the product or service is sold separately by us or another vendor or could be resold by the customer. Further, our revenue arrangements generally do not include a general right of return related to the delivered products. Where the aforementioned criteria for a separate unit of accounting are not met, the deliverable is combined with the undelivered element(s) and treated as a single unit of accounting for purposes of allocation of the arrangement consideration and revenue recognition.
For our multiple-element arrangements, we allocate revenue to each element based on a selling price hierarchy at the arrangement's inception. The relative selling price for each unit of accounting in a multiple-element arrangement is established using vendor-specific objective evidence (VSOE), if available, third-party evidence (TPE), if available, or management's best estimate of stand-alone selling price (BESP). In most cases, the Company has neither VSOE nor TPE and therefore uses BESP. The total arrangement consideration is allocated to each separate unit of accounting for each of the deliverables using the relative selling prices of each unit based on the aforementioned selling price hierarchy. We limit the amount of revenue recognized for delivered elements to an amount that is not contingent upon future delivery of additional products or services or meeting any specified performance conditions.
The objective of BESP is to determine the price at which the Company would transact a sale if the product or service were sold on a stand-alone basis. Management's BESP is determined by considering multiple factors including actual contractual selling prices when the item is sold on a stand-alone basis, as well as market conditions, competition, internal costs, profit objectives and pricing practices. As pricing and marketing strategies evolve, we may modify our pricing practices in the future, which could result in changes to BESP, or to the development of VSOE or TPE for individual products or services. As a result, future revenue recognition for multiple-element arrangements could differ from recognition in the current period. Our relative selling prices are analyzed on an annual basis or more frequently if we experience significant changes in selling prices.
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
Revenues are recognized when: (1) persuasive evidence of an arrangement exists; (2) we deliver the products and services; (3) the sale price is fixed or determinable; and (4) collection is reasonably assured. Revenues that are not recognized at the time of sale because the foregoing conditions are not met are recognized when those conditions are subsequently met. Where applicable, we reduce revenue for certain incentive programs where we have the ability to sufficiently estimate the effects of these items. In some cases, the arrangements also contain provisions requiring customer acceptance of the setup activities prior to commencement of the ongoing services arrangement. Up-front fees billed during the setup phase for these arrangements are deferred and setup costs that are direct and incremental to the contract are capitalized. Revenue recognition does not begin until after customer acceptance in cases where contracts contain acceptance provisions. Once the setup phase is complete and customer acceptance occurs, the Company recognizes revenue and the related costs for each element as delivered. In situations where the arrangement does not require customer acceptance before the Company begins providing services, revenue is recognized for each element as delivered and no costs are deferred.
The Company evaluates its marketing database arrangements to determine whether the arrangement contains a lease. If the arrangement is determined to contain a lease, applicable accounting standards require the Company to account for the lease component separately from the remaining components of the arrangement. In cases where marketing database arrangements are determined to include a lease, the lease is evaluated to determine whether it is a capital lease or operating lease and accounted for accordingly. These lease revenues are not significant to the Company's consolidated financial statements.
Sales of third-party software, hardware and certain other equipment are recognized when delivered. If such sales are part of a multiple-element arrangement, they are recognized as a separate element unless collection of the sales price is dependent upon delivery of other products or services. Additionally, the Company evaluates revenue from the sale of data, software, hardware and equipment in accordance with accounting standards to determine whether such revenue should be recognized on a gross or a net basis. All of the factors in the accounting standards are considered with the primary factor being whether the Company is the primary obligor in the arrangement. "Out-of-pocket" expenses incurred by, and reimbursed to, the Company in connection with customer contracts are recorded as gross revenue.
The Company also performs services on a project basis outside of, or in addition to, the scope of long-term arrangements. The Company recognizes revenue from these services as the services are performed.
All taxes assessed on revenue-producing transactions described above are presented on a net basis, or excluded from revenues.
Revenues from the licensing of data are recognized upon delivery of the data to the customer. Revenue from the licensing of data to the customer in circumstances where the license agreement contains a volume cap is recognized in proportion to the total records to be delivered under the arrangement. Revenue from the sale of data on a per-record basis is recognized as the records are delivered.
Revenues from onboarding customer data into digital marketing applications are recognized as the services are delivered over the contract.
Concentration of Credit Risk -
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of trade accounts, unbilled and notes receivable. The Company's receivables are from a large number of customers. Accordingly, the Company's credit risk is affected by general economic conditions. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. Management, however, believes the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held.
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
Income Taxes -
The Company and its domestic subsidiaries file a consolidated federal income tax return. The Company's foreign subsidiaries file separate income tax returns in the countries in which their operations are based.
The Company makes estimates and judgments in determining the provision for income taxes for financial statement purposes. These estimates and judgments occur in the calculation of tax credits, benefits, and deductions, and in the calculation of certain tax assets and liabilities that arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes, as well as the interest and penalties related to uncertain tax positions. Significant changes in these estimates may result in an increase or decrease to the tax provision in a subsequent period. The Company assesses the likelihood that it will be able to recover its deferred tax assets. If recovery is not likely, the Company increases the provision for taxes by recording a valuation allowance against the deferred tax assets that it estimates will not ultimately be recoverable. The Company believes that the deferred tax assets recorded on the consolidated balance sheets will be ultimately recovered. However, should a change occur in the Company's ability to recover its deferred tax assets, its tax provision would increase in the period in which the Company determined that the recovery was not likely.
The calculation of tax liabilities involves dealing with uncertainties in the application of complex tax regulations. The Company recognizes liabilities for uncertain tax positions based on a two-step process pursuant to ASC 740,
Income Taxes
. The first step is to evaluate the tax position for recognition by determining whether the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. If the Company determines that a tax position will more likely than not be sustained on audit, the second step requires the Company to estimate and measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. It is inherently difficult and subjective to estimate such amounts, as the Company has to determine the probability of various possible outcomes.
The Company re-evaluates these uncertain tax positions on a quarterly basis. This evaluation is based on factors such as changes in facts or circumstances, changes in tax law, new audit activity, and effectively settled issues. Determining whether an uncertain tax position is effectively settled requires judgment. Such a change in recognition or measurement would result in the recognition of a tax benefit or an additional charge to the tax provision.
Foreign Currency Translation -
The reporting currency of the Company is the U.S. dollar. The functional currency of our foreign operations generally is the applicable local currency for each foreign subsidiary. The balance sheets of the Company's foreign subsidiaries are translated at period-end rates of exchange, and the statements of operations are translated at the weighted-average exchange rate for the period. Gains or losses resulting from translating foreign currency financial statements are included in accumulated other comprehensive income (loss) in the consolidated statements of stockholders' equity and comprehensive income (loss).
Advertising Expense -
The Company expenses advertising costs as incurred. Advertising expense was approximately $5.9 million, $5.0 million and $5.7 million for the fiscal years ended March 31, 2016, 2015 and 2014, respectively. Advertising expense is included in operating expenses on the accompanying consolidated statements of operations.
Guarantees -
The Company accounts for the guarantees of indebtedness of others under applicable accounting standards which require a guarantor to recognize, at the inception of the guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. A guarantor is also required to make additional disclosures in its financial statements about obligations under certain guarantees issued. The Company's liability for the fair value of guarantees is not material (see note 11).
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
Loss Contingencies and Legal Expenses -
The Company records a liability for loss contingencies when the liability is probable and reasonably estimable. Legal fees associated with loss contingencies are recorded when the legal fees are incurred.
Earnings (Loss) per Share -
A reconciliation of the numerator and denominator of basic and diluted earnings (loss) per share is shown below (in thousands, except per share amounts):
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
Net loss from continuing operations
|
|
$
|
(8,648
|
)
|
|
$
|
(26,542
|
)
|
|
$
|
(17,340
|
)
|
Net earnings from discontinued operations, net of tax
|
|
|
15,351
|
|
|
|
15,511
|
|
|
|
26,143
|
|
Net earnings (loss)
|
|
$
|
6,703
|
|
|
$
|
(11,031
|
)
|
|
$
|
8,803
|
|
Net loss attributable to noncontrolling interest
|
|
|
-
|
|
|
|
-
|
|
|
|
(60
|
)
|
Net earnings (loss) attributable to Acxiom
|
|
$
|
6,703
|
|
|
$
|
(11,031
|
)
|
|
$
|
8,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted-average shares outstanding
|
|
|
77,616
|
|
|
|
77,106
|
|
|
|
74,690
|
|
Basic earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
(0.11
|
)
|
|
$
|
(0.34
|
)
|
|
$
|
(0.23
|
)
|
Discontinued operations
|
|
|
0.20
|
|
|
|
0.20
|
|
|
|
0.35
|
|
Net earnings (loss)
|
|
$
|
0.09
|
|
|
$
|
(0.14
|
)
|
|
$
|
0.12
|
|
Net loss attributable to noncontrolling interest
|
|
|
-
|
|
|
|
-
|
|
|
|
(0.00
|
)
|
Net earnings (loss) attributable to Acxiom
|
|
$
|
0.09
|
|
|
$
|
(0.14
|
)
|
|
$
|
0.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted-average shares outstanding
|
|
|
77,616
|
|
|
|
77,106
|
|
|
|
74,690
|
|
Dilutive effect of common stock options, warrants, and restricted stock as computed under the treasury stock method
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Diluted weighted-average shares outstanding
|
|
|
77,616
|
|
|
|
77,106
|
|
|
|
74,690
|
|
Diluted earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
(0.11
|
)
|
|
$
|
(0.34
|
)
|
|
$
|
(0.23
|
)
|
Discontinued operations
|
|
|
0.20
|
|
|
|
0.20
|
|
|
|
0.35
|
|
Net earnings (loss)
|
|
$
|
0.09
|
|
|
$
|
(0.14
|
)
|
|
$
|
0.12
|
|
Net loss attributable to noncontrolling interest
|
|
|
-
|
|
|
|
-
|
|
|
|
(0.00
|
)
|
Net earnings (loss) attributable to Acxiom
|
|
$
|
0.09
|
|
|
$
|
(0.14
|
)
|
|
$
|
0.12
|
|
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
Due to the net loss from continuing operations in fiscal 2016, 2015 and 2014, the dilutive effect of options, warrants and restricted stock units covering 1.5 million, 1.4 million shares and 2.1 million shares, respectively, of common stock was excluded from the earnings per share calculation since the impact on the calculation was anti-dilutive. Additional options and warrants to purchase shares of common stock and restricted stock units, including performance-based restricted stock units not meeting performance criteria, that were outstanding during the periods presented but were not included in the computation of diluted earnings (loss) per share because the effect was anti-dilutive are shown below (in thousands, except per share amounts):
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Number of shares outstanding under options, warrants and restricted stock units
|
|
|
1,654
|
|
|
|
1,829
|
|
|
|
834
|
|
Range of exercise prices for options
|
|
$
|
17.49-$62.06
|
|
|
$
|
19.18-$62.06
|
|
|
$
|
29.30-$62.06
|
|
Share-based Compensation -
The Company records share-based compensation expense according to the provisions of ASC Topic 718,
"Compensation – Stock Compensation.
" ASC Topic 718 requires all share-based payments to employees, including grants of employee stock options, to be recognized in the statement of operations over the service period of the award based on their fair values. Under the provisions of ASC Topic 718, the Company determines the appropriate fair value model to be used for valuing share-based payments and the amortization method for compensation cost.
The Company has stock option plans and equity compensation plans (collectively referred to as the "share-based plans") administered by the compensation committee ("compensation committee") of the board of directors under which options and restricted stock units were outstanding as of March 31, 2016.
The Company's equity compensation plan provides that all associates (employees, officers, directors, affiliates, independent contractors or consultants) are eligible to receive awards (grant of any option, stock appreciation right, restricted stock award, restricted stock unit award, performance award, performance share, performance unit, qualified performance-based award, or other stock unit award) under the plan with the terms and conditions applicable to an award set forth in applicable grant documents.
Incentive stock option awards granted under the share-based plans cannot be granted with an exercise price less than 100% of the per-share market value of the Company's shares at the date of grant and have a maximum duration of ten years from the date of grant. Board policy currently requires that nonqualified options also must be priced at or above the fair market value of the common stock at the time of grant with a maximum duration of ten years.
Restricted stock units may be issued under the equity compensation plan and represent the right to receive shares in the future by way of an award agreement which includes vesting provisions. Award agreements can further provide for forfeitures triggered by certain prohibited activities, such as breach of confidentiality. All restricted stock units will be expensed over the vesting period as adjusted for estimated forfeitures. The vesting of some restricted stock units is subject to the Company's achievement of certain performance criteria, as well as the individual remaining employed by the Company for a period of years.
The Company also has outstanding performance-based stock appreciation rights and performance-based stock units. These are expensed over the vesting period of the award.
The Company receives income tax deductions as a result of the exercise of nonqualified stock options and the vesting of other stock-based awards. The tax benefit of share-based compensation expense in excess of the book compensation expense is reflected as a financing cash inflow and operating cash outflow included in changes in operating assets and liabilities. The Company has elected the short-cut method in accounting for the tax benefits of share-based payment awards.
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
Hedging -
The Company has entered into an interest rate swap as a cash flow hedge against LIBOR interest rate movements on the term loan. All changes in fair value of the derivative are deferred and recorded in other comprehensive income (loss) until the related forecasted transaction is recognized in the consolidated statement of operations. The fair value of the interest rate swap agreement recorded in accumulated other comprehensive income (loss) may be recognized in the statement of operations if certain terms of the floating-rate debt change, if the floating-rate debt is extinguished or if the interest rate swap agreement is terminated prior to maturity.
Derivatives -
Derivative financial instruments are valued in the market using regression analysis. Significant inputs to the derivative valuation for interest rate swaps are observable in active markets and are classified as Level 2 in the fair value hierarchy.
Restructuring -
The Company records costs associated with employee terminations and other exit activity in accordance with ASC 420,
Exit or Disposal Cost Obligations
, depending on whether the costs relate to exit or disposal activities under the accounting standards, or whether they are other post-employment termination benefits. Under applicable accounting standards for exit or disposal costs, the Company records employee termination benefits as an operating expense when the benefit arrangement is communicated to the employee and no significant future services are required. Under the accounting standards related to post employment termination benefits the Company records employee termination benefits when the termination benefits are probable and can be estimated. The Company recognizes the present value of facility lease termination obligations, net of estimated sublease income and other exit costs, when the Company has future payments with no future economic benefit or a commitment to pay the termination costs of a prior commitment. In future periods the Company will record accretion expense to increase the liability to an amount equal to the estimated future cash payments necessary to exit the leases. This requires judgment and management estimation in order to determine the expected time frame for securing a subtenant, the amount of sublease income to be received and the appropriate discount rate to calculate the present value of the future cash flows. Should actual lease exit costs differ from estimates, the Company may be required to adjust the restructuring charge which will impact net earnings (loss) in the period any adjustment is recorded.
Adoption of New Accounting Standards –
In November 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, as part of its U.S. GAAP simplification initiative. This update requires entities to present deferred tax assets (DTAs) and deferred tax liabilities (DTLs) as noncurrent in a classified balance sheet, thus simplifying the current guidance which requires entities to separately present DTAs and DTLs as current or noncurrent in a classified balance sheet. We have early adopted this standard and have applied the requirements retrospectively to all periods presented. The adoption of this standard resulted in the reclassification of $25.6 million from current deferred income tax assets in the consolidated balance sheet as of March 31, 2015 to noncurrent deferred income tax assets ($0.4 million) and noncurrent deferred income tax liabilities ($25.2 million).
In September 2015, the FASB issued update ASU No. 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments. This update eliminates the requirement for an acquirer to restate prior period financial statements for measurement period adjustments. The new guidance requires that the cumulative impact of a measurement period adjustment, including the impact on prior periods, be recognized in the reporting period in which the adjustment is identified. In addition, separate presentation on the face of the income statement or disclosure in the notes is required regarding the portion of the adjustment recorded in the current period earnings (loss) that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. There was no impact on the Company's financial condition and earnings (loss) as a result of early adopting this guidance. Because adoption of the guidance is prospective, the impact of ASU 2015-16 on the Company's financial condition and earnings (loss) will depend upon the nature of any measurement period adjustments identified in future periods.
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
In April 2015, the FASB issued update ASU No. 2015-03, Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. This update requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The existing recognition and measurement guidance for debt issuance costs is not affected by the new guidance. We have early adopted this standard and have applied the requirements retrospectively to all periods presented. The adoption of this standard resulted in the reclassification of $2.7 million and $3.1 million from other assets, net in the consolidated balance sheets as of March 31, 2016 and 2015, respectively, to long-term debt (see note 9).
In April 2014, the FASB issued update ASU No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. This update changed the requirements for determining whether a component is included in discontinued operations and required expanded disclosures that provide readers of financial statements with more information about the assets, liabilities, revenues, and expenses of discontinued operations. The update was effective for Acxiom at the beginning of fiscal 2016, and did not have a material impact on the Company's consolidated financial statements.
Recent Accounting Pronouncements Not Yet Adopted –
In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting as part of its simplification initiative. The objective of the simplification initiative is to identify, evaluate, and improve areas of GAAP for which cost and complexity can be reduced while maintaining the usefulness of the information provided to users of financial statements. The areas for simplification in ASU 2016-09 involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 is effective for annual periods beginning after December 15, 2016 (fiscal 2018 for the Company), including interim periods within those fiscal years; earlier adoption is permitted. The Company is currently evaluating the impact of the adoption of this guidance on its consolidated financial condition, results of operations and cash flows.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) as a comprehensive new leases standard that amends various aspects of existing guidance for leases and requires additional disclosures about leasing arrangements. It will require lessees to recognize lease assets and lease liabilities for those leases classified as operating leases under previous guidance, ASC 840, Leases. ASU 2016-02 creates a new Topic, ASC 842, Leases. This new Topic retains a distinction between finance leases and operating leases. The classification criteria for distinguishing between finance leases and operating leases are substantially similar to the classification criteria for distinguishing between capital leases and operating leases in the previous leases guidance. ASU 2016-02 is effective for annual periods beginning after December 15, 2018 (fiscal 2020 for the Company), including interim periods within those fiscal years; earlier adoption is permitted. In the financial statements in which the ASU is first applied, leases shall be measured and recognized at the beginning of the earliest comparative period presented with an adjustment to equity. The Company is currently evaluating the impact of the adoption of this guidance on its consolidated financial condition, results of operations and cash flows.
In May 2014, the FASB issued update ASU 2014-09, Revenue from Contracts with Customers: Topic 606, to supersede nearly all existing revenue recognition guidance under U.S. GAAP, as well as some cost guidance and guidance on certain gains and losses. The FASB also issued updates ASU 2016-08, Revenue from Contracts with Customers – Principal versus Agent Considerations, and ASU 2016-10, Revenue from Contracts with Customers – Identifying Performance Obligations and Licensing. The core principle of the new guidance is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. The guidance defines a five step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP, including identifying performance obligations in
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation, among others. The effective date for the update has been deferred until fiscal 2019 for the Company, with early application allowed for fiscal 2018. Adoption of the update may be applied using either of two methods: (i) retrospective application to each prior reporting period presented with the option to elect certain practical expedients; or (ii) retrospective application with the cumulative effect recognized at the date of initial application and providing certain additional disclosures. We are currently evaluating the accounting, transition and disclosure requirements of the standard and cannot currently estimate the financial statement impact of adoption.
The Company does not anticipate that the adoption of any other recent accounting pronouncements will have a material impact on the Company's consolidated financial position, results of operations or cash flows.
2.
RESTRUCTURING, IMPAIRMENT AND OTHER CHARGES:
The following table summarizes the restructuring activity included in gains, losses and other items, net in the consolidated statements of operations for the fiscal years ended March 31, 2016, 2015 and 2014 (dollars in thousands):
|
|
Associate-related reserves
|
|
|
Lease
accruals
|
|
|
Total
|
|
March 31, 2013
|
|
$
|
3,689
|
|
|
$
|
2,791
|
|
|
$
|
6,480
|
|
Restructuring charges and adjustments
|
|
|
12,910
|
|
|
|
56
|
|
|
|
12,966
|
|
Payments
|
|
|
(10,057
|
)
|
|
|
(1,334
|
)
|
|
|
(11,391
|
)
|
March 31, 2014
|
|
$
|
6,542
|
|
|
$
|
1,513
|
|
|
$
|
8,055
|
|
Restructuring charges and adjustments
|
|
|
13,284
|
|
|
|
6,500
|
|
|
|
19,784
|
|
Payments
|
|
|
(12,615
|
)
|
|
|
(2,785
|
)
|
|
|
(15,400
|
)
|
March 31, 2015
|
|
$
|
7,211
|
|
|
$
|
5,228
|
|
|
$
|
12,439
|
|
Restructuring charges and adjustments
|
|
|
8,630
|
|
|
|
3,002
|
|
|
|
11,632
|
|
Payments
|
|
|
(12,986
|
)
|
|
|
(4,706
|
)
|
|
|
(17,692
|
)
|
March 31, 2016
|
|
$
|
2,855
|
|
|
$
|
3,524
|
|
|
$
|
6,379
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring Plans
In fiscal 2016, the Company recorded a total of $12.0 million in restructuring charges and adjustments included in gains, losses and other items, net in the consolidated statement of operations. The expense included severance and other associate-related charges of $8.6 million, lease termination charges and accruals of $3.0 million, and leasehold improvement write offs of $0.4 million.
The associate-related accruals of $8.6 million relate to the termination of associates in the United States, Europe, Brazil and Australia. Of the amount accrued for 2016, $2.4 million remained accrued as of March 31, 2016. These costs are expected to be paid out in fiscal 2017.
The lease termination charges and accruals of $3.0 million included a $1.4 million lease early-termination fee in France, a lease accrual of $0.2 million, and a $1.4 million increase to the fiscal 2015 lease restructuring plans. The fiscal 2016 lease early-termination fee and lease accrual were fully paid during fiscal 2016.
In fiscal 2015, the Company recorded a total of $21.8 million in restructuring charges and adjustments included in gains, losses and other items, net in the consolidated statement of operations. The expense included severance and other associate-related charges of $13.3 million, lease accruals of $6.5 million, and the write-off of leasehold improvements of $2.0 million.
The associate-related accruals of $13.3 million related to the termination of associates in the United States, Europe, Australia, and China and included an increase of $0.7 million to the fiscal 2014 restructuring plan. Of the amount accrued for 2015, $0.5 million remained accrued as of March 31, 2016. These costs are expected to be paid out in fiscal 2017.
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
The lease accruals of $6.5 million were determined under the accounting standards which govern exit costs. The Company has ceased using certain leased office facilities. The Company intends to attempt to sublease the facilities to the extent possible. The Company established a liability for the fair value of the remaining lease payments, partially offset by the estimated sublease payments to be received over the term of the leases. The fair value of these liabilities is based on a net present value model using a credit-adjusted risk-free rate. The liability will be satisfied over the remainder of the leased properties' terms, which continue through November 2025. Actual sublease payments may differ from the estimates originally made by the Company. Any future changes in the estimates or in the actual sublease income could require future adjustments to the liabilities, which would impact net earnings (loss) in the period the adjustment is recorded. Of the amount accrued for 2015, $3.5 million remained accrued as of March 31, 2016.
In fiscal 2014, the Company recorded a total of $13.0 million in restructuring charges and adjustments included in gains, losses and other items, net in the consolidated statement of operations. The expense includes severance and other associate-related charges of $13.0 million and relates to the termination of associates in the United States, Australia, China, and Europe. These costs were paid out by the end of fiscal 2015.
Gains, Losses and Other Items
Gains, losses and other items for each of the years presented are as follows (dollars in thousands):
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Restructuring plan charges and adjustments
|
|
$
|
11,632
|
|
|
$
|
19,784
|
|
|
$
|
12,966
|
|
Other restructuring charges
|
|
|
381
|
|
|
|
1,976
|
|
|
|
-
|
|
Legal contingencies
|
|
|
-
|
|
|
|
-
|
|
|
|
4,202
|
|
LiveRamp acquisition-related costs (see note 3)
|
|
|
-
|
|
|
|
820
|
|
|
|
-
|
|
Other
|
|
|
119
|
|
|
|
20
|
|
|
|
-
|
|
|
|
$
|
12,132
|
|
|
$
|
22,600
|
|
|
$
|
17,168
|
|
3.
ACQUISITIONS:
Addressable Television Net Assets from Allant ("Allant")
On December 1, 2015, the Company acquired certain addressable television net assets from The Allant Group, Inc. The acquisition provides the Company additional consumer insight capabilities that enable clients to more effectively reach their television channel customer base and audiences. The Company paid approximately $5.4 million in cash. The Company has omitted pro forma disclosures related to this acquisition as the pro forma effect of this acquisition is not material. The results of operation for the acquisition are included in the Company's consolidated results beginning December 1, 2015.
The following table presents the purchase price allocation related to assets acquired and liabilities assumed (dollars in thousands):
|
|
December 1, 2015
|
|
Assets acquired:
|
|
|
|
Accounts receivable
|
|
$
|
499
|
|
Developed technology
|
|
|
2,700
|
|
Other intangible assets
|
|
|
1,400
|
|
Goodwill
|
|
|
1,377
|
|
|
|
|
5,976
|
|
Accounts payable
|
|
|
(590
|
)
|
Net cash paid
|
|
$
|
5,386
|
|
The fair values assigned to tangible and identifiable intangible assets acquired and liabilities assumed were based on preliminary calculations and valuations using management's estimates and assumptions and were based on the information that was available as of the date of acquisition. The Company expects to finalize the valuation as soon as practical.
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
LiveRamp
On July 1, 2014, the Company acquired all of the outstanding shares of LiveRamp, Inc. ("LiveRamp"), a leading service provider for onboarding customer data into digital marketing applications. The Company acquired LiveRamp to, among other things, provide clients with solutions for bringing offline customer data online with better matching, more connectivity, and faster onboarding. The Company has included the financial results of LiveRamp in the consolidated financial statements from the date of acquisition. LiveRamp is included in the Connectivity segment. The acquisition date fair value of the consideration transferred for LiveRamp was approximately $272.7 million which consisted of the following (dollars in thousands):
|
|
July 1, 2014
|
|
Cash, net of $12.0 million cash acquired
|
|
$
|
234,672
|
|
Restricted cash held in escrow
|
|
|
31,000
|
|
Fair value of stock options issued included in purchase price
|
|
|
6,978
|
|
Total fair value of consideration transferred
|
|
$
|
272,650
|
|
|
|
|
|
|
The fair value of the stock options issued by the Company was determined using a binomial lattice approach (see note 12). The total fair value of the stock options issued was $30.5 million of which $7.0 million was allocated to the purchase consideration and $23.5 million was allocated to future services and will be expensed over the remaining service periods on a straight-line basis, net of any forfeitures.
On the acquisition date, the Company delivered $31.0 million of cash to an escrow agent according to the terms of the purchase agreement. The cash was restricted as to withdrawal or use by the Company. The restricted cash was delivered to the LiveRamp sellers one year from the acquisition date, during fiscal 2016. The principal escrow amount was owned by the Company until funds were delivered to the LiveRamp sellers. All interest and earnings on the principal escrow amount remained property of the Company. At March 31, 2015, the restricted cash was reported as restricted cash held in escrow, with an offsetting liability reported as acquisition escrow payable, on the consolidated balance sheet.
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
The following table summarizes the estimated fair values of assets acquired and liabilities assumed as of the date of the acquisition (dollars in thousands):
|
|
July 1, 2014
|
|
Assets acquired:
|
|
|
|
Cash
|
|
$
|
12,016
|
|
Trade accounts receivable
|
|
|
5,206
|
|
Deferred income tax assets
|
|
|
10,444
|
|
Goodwill
|
|
|
213,093
|
|
Developed technology (Software)
|
|
|
40,000
|
|
Other intangible assets (Other assets, net)
|
|
|
26,500
|
|
Other current and noncurrent assets
|
|
|
1,306
|
|
|
|
|
308,565
|
|
Deferred income tax liabilities
|
|
|
(18,945
|
)
|
Accounts payable, accrued expenses and deferred revenue
|
|
|
(4,954
|
)
|
Net assets acquired
|
|
|
284,666
|
|
Less:
|
|
|
|
|
Cash acquired
|
|
|
12,016
|
|
Net purchase price allocated
|
|
$
|
272,650
|
|
Less:
|
|
|
|
|
Fair value of stock options issued included in purchase price
|
|
|
6,978
|
|
Net cash paid
|
|
$
|
265,672
|
|
|
|
|
|
|
The excess of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired was recorded as goodwill and is primarily attributed to development of future technology and products related to the onboarding of customer data into digital marketing applications, development of future customer relationships, and LiveRamp's assembled workforce. The fair values assigned to tangible and identifiable intangible assets acquired and liabilities assumed were based on preliminary calculations and valuations and on management's estimates and assumptions and were based on the information that was available as of the date of the acquisition. Goodwill is not expected to be deductible for U.S. income tax purposes.
The amounts allocated to other intangible assets in the table above included customer relationships and a trade name. Intangible assets will be amortized on a straight-line basis over the estimated useful lives of 2 to 6 years. The following table presents the components of intangible assets acquired and their estimated useful lives as of the acquisition date (dollars in thousands):
|
|
Fair value
|
|
|
Useful life
(in years)
|
|
Developed technology
|
|
$
|
40,000
|
|
|
|
4
|
|
Customer relationships
|
|
|
25,000
|
|
|
|
6
|
|
Trade name
|
|
|
1,500
|
|
|
|
2
|
|
Total intangible assets subject to amortization
|
|
$
|
66,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company's consolidated statements of operations for fiscal 2015 included revenue and net loss of $27.0 million and $16.5 million, respectively, attributable to LiveRamp since the acquisition.
Following are the Company's supplemental consolidated results on an unaudited pro forma basis, as if the LiveRamp acquisition had taken place at the beginning of each of the fiscal years presented (dollars in thousands, except per-share amounts):
|
|
2015
|
|
|
2014
|
|
Revenues
|
|
$
|
811,619
|
|
|
$
|
824,393
|
|
Net loss attributable to Acxiom
|
|
$
|
(33,797
|
)
|
|
$
|
(40,268
|
)
|
Diluted loss per share
|
|
$
|
(0.44
|
)
|
|
$
|
(0.54
|
)
|
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
These pro forma results were based on estimates and assumptions, which we believe are reasonable. They were not the results that would have been realized had we been a combined company during the periods presented and are not necessarily indicative of our consolidated results of operations in future periods. The pro forma results include adjustments primarily related to purchase accounting adjustments, including amortization expense of $3.7 million and $14.9 million for fiscal years 2015 and 2014, respectively, related to acquired intangible assets, stock-based compensation expense of approximately $5.0 million and $21.3 million for fiscal years 2015 and 2014, respectively, related to unvested stock options and restricted stock units issued to former LiveRamp employees, and the related income tax effects as though the acquisition occurred as of the beginning of the Company's fiscal years 2015 and 2014.
Other Intangible Assets
The amounts allocated to other intangible assets from acquisitions include software, customer relationship intangibles and trademarks. Amortization lives for those intangibles range from two years to ten years. The following table shows the amortization activity of purchased intangible assets (dollars in thousands):
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Developed technology assets, gross (Software)
|
|
$
|
42,850
|
|
|
$
|
42,524
|
|
|
$
|
2,537
|
|
Accumulated amortization
|
|
|
(17,950
|
)
|
|
|
(9,924
|
)
|
|
|
(2,349
|
)
|
Net developed technology assets
|
|
$
|
24,900
|
|
|
$
|
32,600
|
|
|
$
|
188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer/trademark assets, gross (Other assets)
|
|
$
|
35,466
|
|
|
$
|
34,166
|
|
|
$
|
7,674
|
|
Accumulated amortization
|
|
|
(16,263
|
)
|
|
|
(11,265
|
)
|
|
|
(7,393
|
)
|
Net customer/trademark assets
|
|
$
|
19,203
|
|
|
$
|
22,901
|
|
|
$
|
281
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets, gross
|
|
$
|
78,316
|
|
|
$
|
76,690
|
|
|
$
|
10,211
|
|
Total accumulated amortization
|
|
|
(34,213
|
)
|
|
|
(21,189
|
)
|
|
|
(9,742
|
)
|
Net intangible assets
|
|
$
|
44,103
|
|
|
$
|
55,501
|
|
|
$
|
469
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense
|
|
$
|
15,467
|
|
|
$
|
11,447
|
|
|
$
|
340
|
|
The intangible assets in the table above have remaining amortizable periods over the next five years.
4.
DISCONTINUED OPERATIONS:
IT Infrastructure Management business ("ITO")
On May 20, 2015, the Company announced it had entered into a definitive agreement to sell its ITO business to Charlesbank Capital Partners and M/C Partners. The sale was completed on July 31, 2015. Beginning in the first quarter of fiscal 2016, the Company began reporting the results of operations, cash flows, and the balance sheet amounts pertaining to ITO as a component of discontinued operations in the consolidated financial statements. Prior to the discontinued operations classification, the ITO business unit was included in the IT Infrastructure Management segment in the Company's segment results.
At the closing of the transaction, the Company received total consideration of $131.0 million ($140.0 million stated sales price less closing adjustments and transaction costs of $9.0 million). The Company may also receive up to a maximum of $50 million in contingent payments in future periods through 2020 subject to certain conditions. Due to the uncertainty of contingent payments, income will be recorded upon resolution of the contingency as a component of income from discontinued operations. In addition, the Company has the right to participate in distributions of the divested entity above a defined amount. The Company reported a gain of $9.3 million on the sale which is included in earnings from discontinued operations, net of tax.
The Company also entered into an agreement to amend its credit agreement (see Note 9 – Long-Term Debt). The effectiveness of the amendments contained in the agreement were conditioned on, among other things, the closing of the ITO disposition. Once the ITO disposition was completed and the amendment became fully effective, certain financial covenants in the credit agreement were modified for
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
the quarters ending on September 30, 2015, December 31, 2015 and March 31, 2016. Additionally the Company is not entitled to declare or pay any dividends during this time and share repurchases will be limited to no more than $100 million depending on the Company's leverage ratio. After March 31, 2016, the financial covenants and dividend and share repurchase limitations will return to the requirements in the credit agreement in effect prior to the amendment. In addition, the amendment revised certain definitions in the credit agreement to clarify the effect of acquisitions and dispositions on certain financial covenants.
On July 31, 2015, the Company applied $55.0 million of proceeds from the sale to repay outstanding Company indebtedness in order to comply with the Company's existing credit agreement (see Note 9 – Long-Term Debt). The Company allocated interest expense associated with the $55.0 million repayment of Company indebtedness to the ITO discontinued operating business. Allocated interest expense was $0.4 million, $1.3 million, and $1.7 million for the fiscal years ended March 31, 2016, 2015 and 2014, respectively. We used the remaining proceeds from the sale to fund expansion of its common stock repurchase program and for general corporate purposes.
Summary results of operations of ITO for the fiscal years ended March 31, 2016, 2015 and 2014, respectively, are segregated and included in earnings from discontinued operations, net of tax, in the consolidated statements of operations. The following table is a reconciliation of the major classes of line items constituting earnings from discontinued operations, net of tax (dollars in thousands):
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Major classes of line items constituting earnings from discontinued operations, net of tax:
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
69,410
|
|
|
$
|
215,148
|
|
|
$
|
257,125
|
|
Cost of revenue
|
|
|
50,837
|
|
|
|
167,524
|
|
|
|
186,699
|
|
Gross profit
|
|
|
18,573
|
|
|
|
47,624
|
|
|
|
70,426
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing
|
|
|
1,192
|
|
|
|
2,771
|
|
|
|
2,015
|
|
General and administrative
|
|
|
6,053
|
|
|
|
10,736
|
|
|
|
14,749
|
|
Gain on sale of discontinued operations
|
|
|
(9,349
|
)
|
|
|
-
|
|
|
|
-
|
|
Gains, losses and other items, net
|
|
|
367
|
|
|
|
2,037
|
|
|
|
4,746
|
|
Total operating expenses
|
|
|
(1,737
|
)
|
|
|
15,544
|
|
|
|
21,510
|
|
Income from discontinued operations
|
|
|
20,310
|
|
|
|
32,080
|
|
|
|
48,916
|
|
Interest expense
|
|
|
(681
|
)
|
|
|
(2,378
|
)
|
|
|
(3,000
|
)
|
Other, net
|
|
|
(230
|
)
|
|
|
(334
|
)
|
|
|
3
|
|
Earnings from discontinued operations before income taxes
|
|
|
19,399
|
|
|
|
29,368
|
|
|
|
45,919
|
|
Income taxes
|
|
|
3,598
|
|
|
|
11,973
|
|
|
|
17,587
|
|
Earnings from discontinued operations, net of tax
|
|
$
|
15,801
|
|
|
$
|
17,395
|
|
|
$
|
28,332
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
The carrying amounts of the major classes of assets and liabilities of ITO are segregated and included in assets from discontinued operations and liabilities from discontinued operations in the consolidated balance sheets. The following table is a reconciliation of the major classes of assets and liabilities of the discontinued operations (dollars in thousands):
|
|
March 31,
2016
|
|
|
March 31,
2015
|
|
Trade accounts receivable, net
|
|
$
|
-
|
|
|
$
|
35,743
|
|
Deferred income taxes
|
|
|
-
|
|
|
|
2,762
|
|
Other current assets
|
|
|
-
|
|
|
|
10,707
|
|
Property and equipment, net of accumulated depreciation and amortization
|
|
|
-
|
|
|
|
44,336
|
|
Goodwill
|
|
|
-
|
|
|
|
71,508
|
|
Purchased software licenses, net of accumulated amortization
|
|
|
-
|
|
|
|
3,943
|
|
Other assets, net
|
|
|
-
|
|
|
|
3,173
|
|
Assets from discontinued operations
|
|
$
|
-
|
|
|
$
|
172,172
|
|
|
|
|
|
|
|
|
|
|
Current installments of long-term debt
|
|
$
|
-
|
|
|
$
|
653
|
|
Trade accounts payable
|
|
|
-
|
|
|
|
8,857
|
|
Accrued expenses
|
|
|
-
|
|
|
|
7,480
|
|
Deferred revenue
|
|
|
-
|
|
|
|
3,658
|
|
Long-term debt
|
|
|
-
|
|
|
|
6,684
|
|
Deferred income taxes
|
|
|
-
|
|
|
|
22,716
|
|
Other liabilities
|
|
|
-
|
|
|
|
6,377
|
|
Liabilities from discontinued operations
|
|
$
|
-
|
|
|
$
|
56,425
|
|
|
|
|
|
|
|
|
|
|
ITO is a provider of managed hosting and cloud infrastructure services, optimized for mid-tier enterprises. The Company entered into certain agreements with ITO in which support services, including data center co-location services, will be provided from the Company to ITO, and from ITO to the Company. Additionally, the Company entered into certain other agreements with ITO to provide or receive leased office space. The terms of these agreements range from several months to the longest of which continues through July 2020. The agreements generally provide cancellation provisions, without penalty, at various times throughout the term. Cash inflows and outflows related to the agreements, included in cash flows from operating activities in the consolidated statements of cash flows, were $4.7 million and $4.2 million, respectively, for the fiscal year ended March 31, 2016. Revenues and expenses related to the agreements, included in loss from continuing operations in the consolidated statements of operations, were $4.7 million and $4.6 million, respectively, for the fiscal year ended March 31, 2016.
U.K. call center operation
On May 30, 2014, the Company substantially completed the sale of its U.K. call center operation, 2Touch, to Parseq Ltd., a European business process outsourcing service provider. Some assets of the 2Touch operation were subject to a second closing, which occurred in March 2015, resulting in the complete disposal of the operation. The 2Touch business qualified for treatment as discontinued operations during fiscal 2015. The results of operations, cash flows, and the balance sheet amounts pertaining to 2Touch have been classified as discontinued operations in the consolidated financial statements.
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
Summary results of operations of the 2Touch business unit for the fiscal years ended March 31, 2016, 2015 and 2014 are segregated and included in earnings from discontinued operations, net of tax, in the consolidated statements of operations and consists of (dollars in thousands):
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Revenues
|
|
$
|
-
|
|
|
$
|
8,484
|
|
|
$
|
35,267
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from discontinued operations before income taxes
|
|
$
|
(450
|
)
|
|
$
|
4
|
|
|
$
|
(2,189
|
)
|
Loss on sale of discontinued operations before income taxes
|
|
|
-
|
|
|
|
(1,888
|
)
|
|
|
-
|
|
Income taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Loss from discontinued operations, net of tax
|
|
$
|
(450
|
)
|
|
$
|
(1,884
|
)
|
|
$
|
(2,189
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The carrying amounts of the major classes of assets and liabilities of the 2Touch business unit are segregated and included in assets from discontinued operations and liabilities from discontinued operations in the consolidated balance sheets and are as follows (dollars in thousands):
|
|
March 31,
2016
|
|
|
March 31,
2015
|
|
Trade accounts receivable, net
|
|
$
|
-
|
|
|
$
|
112
|
|
Assets from discontinued operations
|
|
$
|
-
|
|
|
$
|
112
|
|
|
|
|
|
|
|
|
|
|
Other accrued expenses
|
|
|
-
|
|
|
|
1,008
|
|
Liabilities from discontinued operations
|
|
$
|
-
|
|
|
$
|
1,008
|
|
|
|
|
|
|
|
|
|
|
5.
OTHER CURRENT AND NONCURRENT ASSETS:
Other current assets consist of the following (dollars in thousands):
|
|
March 31,
2016
|
|
|
March 31,
2015
|
|
Prepaid expenses
|
|
$
|
25,313
|
|
|
$
|
20,684
|
|
Assets of non-qualified retirement plan
|
|
|
12,532
|
|
|
|
14,174
|
|
Other miscellaneous assets
|
|
|
52
|
|
|
|
117
|
|
Other current assets
|
|
$
|
37,897
|
|
|
$
|
34,975
|
|
Other noncurrent assets consist of the following (dollars in thousands):
|
|
March 31,
2016
|
|
|
March 31,
2015
|
|
Acquired intangible assets, net
|
|
$
|
19,203
|
|
|
$
|
22,901
|
|
Deferred data acquisition costs
|
|
|
1,644
|
|
|
|
2,347
|
|
Deferred expenses
|
|
|
883
|
|
|
|
1,976
|
|
Prepaid expenses
|
|
|
1,404
|
|
|
|
1,556
|
|
Other miscellaneous noncurrent assets
|
|
|
2,181
|
|
|
|
1,393
|
|
Noncurrent assets
|
|
$
|
25,315
|
|
|
$
|
30,173
|
|
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
6.
GOODWILL:
Goodwill by operating segment and activity for the years ended March 31, 2016 and 2015 was as follows (dollars in thousands).
|
|
Marketing
Services and Audience Solutions
|
|
|
Marketing
Services
|
|
|
Audience
Solutions
|
|
|
Connectivity
|
|
|
Total
|
|
Balance at March 31, 2014
|
|
$
|
286,876
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
286,876
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of LiveRamp
|
|
|
213,093
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
213,093
|
|
Change in foreign currency translation adjustment
|
|
|
(2,607
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,607
|
)
|
Balance at March 31, 2015
|
|
$
|
497,362
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
497,362
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brazil Impairment
|
|
|
(502
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(502
|
)
|
Reallocation of segments
|
|
|
(496,860
|
)
|
|
|
124,627
|
|
|
|
277,516
|
|
|
|
94,717
|
|
|
|
-
|
|
Acquisition of Allant
|
|
|
-
|
|
|
|
-
|
|
|
|
1,377
|
|
|
|
-
|
|
|
|
1,377
|
|
APAC Audience Solutions Impairment
|
|
|
-
|
|
|
|
|
|
|
|
(5,413
|
)
|
|
|
|
|
|
|
(5,413
|
)
|
Change in foreign currency translation adjustment
|
|
|
-
|
|
|
|
(41
|
)
|
|
|
(50
|
)
|
|
|
12
|
|
|
|
(79
|
)
|
Balance at March 31, 2016
|
|
$
|
-
|
|
|
$
|
124,586
|
|
|
$
|
273,430
|
|
|
$
|
94,729
|
|
|
$
|
492,745
|
|
Year end balances in the table above are net of accumulated impairment losses of $120.1 million and $114.2 million at March 31, 2016 and 2015, respectively.
Goodwill by component included in each segment as of March 31, 2016 was:
|
|
Marketing
Services
|
|
|
Audience
Solutions
|
|
|
Connectivity
|
|
|
Total
|
|
U.S.
|
|
$
|
116,594
|
|
|
$
|
273,430
|
|
|
$
|
91,164
|
|
|
$
|
481,188
|
|
APAC
|
|
|
7,992
|
|
|
|
-
|
|
|
|
3,565
|
|
|
|
11,557
|
|
Balance at March 31, 2016
|
|
$
|
124,586
|
|
|
$
|
273,430
|
|
|
$
|
94,729
|
|
|
$
|
492,745
|
|
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
7.
SOFTWARE COSTS:
The Company recorded amortization expense related to internally developed computer software of $30.7 million, $29.0 million, and $9.7 million for fiscal 2016, 2015 and 2014, respectively. Of the amortization expense recorded in fiscal 2016 and 2015, $10.0 million and $7.5 million, respectively, relate to internally developed software acquired as part of the LiveRamp acquisition. Amortization expense in fiscal 2016 and fiscal 2015 also included $1.8 million and $4.3 million, respectively, of accelerated amortization expense resulting from adjusting the remaining estimated useful lives of certain capitalized software products which the Company will no longer be using as a result of the LiveRamp acquisition.
The Company also recorded amortization expense related to purchased software licenses of $3.8 million, $5.0 million and $4.0 million in 2016, 2015 and 2014, respectively.
8.
PROPERTY AND EQUIPMENT:
Property and equipment, some of which has been pledged as collateral for long-term debt, is summarized as follows (dollars in thousands):
|
|
March 31,
2016
|
|
|
March 31,
2015
|
|
Land
|
|
$
|
6,737
|
|
|
$
|
6,737
|
|
Buildings and improvements
|
|
|
222,868
|
|
|
|
202,439
|
|
Data processing equipment
|
|
|
261,101
|
|
|
|
245,538
|
|
Office furniture and other equipment
|
|
|
37,969
|
|
|
|
51,007
|
|
|
|
|
528,675
|
|
|
|
505,721
|
|
Less accumulated depreciation and amortization
|
|
|
345,632
|
|
|
|
329,467
|
|
|
|
$
|
183,043
|
|
|
$
|
176,254
|
|
Depreciation expense on property and equipment (including amortization of property and equipment under capitalized leases) was $40.6 million, $35.5 million and $29.6 million for the fiscal years ended March 31, 2016, 2015 and 2014, respectively.
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
9.
LONG-TERM DEBT:
Long-term debt consists of the following (dollars in thousands):
|
|
March 31,
2016
|
|
|
March 31,
2015
|
|
Term loan credit agreement
|
|
$
|
185,000
|
|
|
$
|
270,000
|
|
Other debt and long-term liabilities
|
|
|
7,856
|
|
|
|
10,087
|
|
Total long-term debt and capital leases
|
|
|
192,856
|
|
|
|
280,087
|
|
Less current installments
|
|
|
32,243
|
|
|
|
32,232
|
|
Less deferred debt financing costs
|
|
|
2,716
|
|
|
|
3,102
|
|
Long-term debt, excluding current installments and deferred debt financing costs
|
|
$
|
157,897
|
|
|
$
|
244,753
|
|
|
|
|
|
|
|
|
|
|
The Company's amended and restated credit agreement provides for (1) term loans up to an aggregate principal amount of $300 million and (2) revolving credit facility borrowings consisting of revolving loans, letter of credit participations and swing-line loans up to an aggregate amount of $300 million.
The term loan is payable in quarterly installments of $7.5 million through September 2017, followed by quarterly installments of $11.3 million through June 2018, with a final payment of $106.3 million due October 9, 2018. The revolving loan commitment expires October 9, 2018.
Term loan and revolving credit facility borrowings bear interest at LIBOR or at an alternative base rate plus a credit spread. At March 31, 2016, the LIBOR credit spread was 2.00%. There were no revolving credit borrowings outstanding at March 31, 2016 or March 31, 2015. The weighted-average interest rate on term loan borrowings at March 31, 2016 was 2.68%. Outstanding letters of credit at March 31, 2016 were $2.1 million.
The term loan allows for prepayments before maturity. The credit agreement is secured by the accounts receivable of Acxiom and its domestic subsidiaries, as well as by the outstanding stock of certain Acxiom subsidiaries.
Under the terms of the term loan, the Company is required to maintain certain debt-to-cash flow and debt service coverage ratios, among other restrictions. At March 31, 2016, the Company was in compliance with these covenants and restrictions. In addition, if certain financial ratios and other conditions are not satisfied, the revolving credit facility limits the Company's ability to pay dividends in excess of $30 million in any fiscal year (plus additional amounts in certain circumstances).
On May 19, 2015, the Company entered into an agreement to further amend its credit agreement. The effectiveness of the amendments contained in the agreement were conditioned on, among other things, the closing of the ITO disposition that occurred on July 31, 2015 (See Note 4 – Discontinued Operations). Once the ITO disposition was completed and the amendment became fully effective, certain financial covenants in the credit agreement were modified for the quarters ending on September 30, 2015, December 31, 2015 and March 31, 2016. Additionally the Company is not entitled to declare or pay any dividends during this time and share repurchases are limited to no more than $100 million depending on the Company's leverage ratio. After March 31, 2016, the financial covenants and dividend and share repurchase rights and limitations will return to the requirements in the credit agreement in effect prior to the amendment. In addition, the amendment revises certain definitions in the credit agreement to clarify the effect of acquisitions and dispositions on certain financial covenants.
On July 31, 2015, the Company used $55.0 million of proceeds from the ITO disposition to repay outstanding Company indebtedness as required by the Company's existing credit agreement. The Company allocated interest expense associated with the $55.0 million repayment of Company indebtedness to the ITO discontinued operating business. Allocated interest expense was $0.4 million, $1.3 million, and $1.7 million for the fiscal years ended March 31, 2016, 2015 and 2014, respectively.
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
On March 10, 2014, the Company entered into an interest rate swap agreement. The agreement provides for the Company to pay interest through March 10, 2017 at a fixed rate of 0.98% plus the applicable credit spread on $50.0 million notional amount, while receiving interest for the same period at the LIBOR rate on the same notional amount. The LIBOR rate as of March 31, 2016 was 0.63%. The swap was entered into as a cash flow hedge against LIBOR interest rate movements on the term loan. The Company assesses the effectiveness of the hedge based on the hypothetical derivative method. There was no ineffectiveness for the period ended March 31, 2016. Under the hypothetical derivative method, the cumulative change in fair value of the actual swap is compared to the cumulative change in fair value of the hypothetical swap, which has terms that identically match the critical terms of the hedged transaction. Thus, the hypothetical swap is presumed to perfectly offset the hedged cash flows. The change in the fair value of the hypothetical swap will then be regarded as a proxy for the present value of the cumulative change in the expected future cash flows from the hedged transactions. All of the fair values are derived from an interest-rate futures model. As of March 31, 2016, the hedge relationship still qualified as an effective hedge under applicable accounting standards. Consequently, all changes in fair value of the derivative will be deferred and recorded in other comprehensive income (loss) until the related forecasted transaction is recognized in the consolidated statement of operations. The fair market value of the derivative was zero at inception and an unrealized loss of $0.1 million since inception is recorded in other comprehensive income (loss). The fair value of the interest rate swap agreement recorded in accumulated other comprehensive income (loss) may be recognized in the consolidated statement of operations if certain terms of the floating-rate debt change, if the floating-rate debt is extinguished or if the interest rate swap agreement is terminated prior to maturity. The Company has assessed the creditworthiness of the counterparty of the swap and concludes that no substantial risk of default exists as of March 31, 2016.
The Company's future obligations, excluding interest, under its long-term debt at March 31, 2016 are as follows (dollars in thousands):
Year ending March 31,
|
|
|
|
2017
|
|
$
|
32,243
|
|
2018
|
|
|
39,820
|
|
2019
|
|
|
119,083
|
|
2020
|
|
|
1,362
|
|
2021
|
|
|
348
|
|
|
|
$
|
192,856
|
|
10.
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
A summary of the activity of the allowance for doubtful accounts, returns and credits is as follows (dollars in thousands):
|
|
Balance at beginning of period
|
|
|
Additions charged to costs and expenses
|
|
|
Other changes
|
|
|
Bad debts written off, net of amounts recovered
|
|
|
Balance at end of period
|
|
2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts, returns and credits
|
|
$
|
4,105
|
|
|
$
|
1,058
|
|
|
$
|
117
|
|
|
$
|
(405
|
)
|
|
$
|
4,875
|
|
2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts, returns and credits
|
|
$
|
4,875
|
|
|
$
|
731
|
|
|
$
|
(288
|
)
|
|
$
|
(895
|
)
|
|
$
|
4,423
|
|
2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts, returns and credits
|
|
$
|
4,423
|
|
|
$
|
3,673
|
|
|
$
|
56
|
|
|
$
|
(890
|
)
|
|
$
|
7,262
|
|
Other changes in the table above result primarily from the effects of exchange rates.
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
11.
COMMITMENTS AND CONTINGENCIES:
Legal Matters
The Company is involved in various claims and legal proceedings. Management routinely assesses the likelihood of adverse judgments or outcomes to these matters, as well as ranges of probable losses, to the extent losses are reasonably estimable. The Company records accruals for these matters to the extent that management concludes a loss is probable and the financial impact, should an adverse outcome occur, is reasonably estimable. These accruals are reflected in the Company's consolidated financial statements. In management's opinion, the Company has made appropriate and adequate accruals for these matters and management believes the probability of a material loss beyond the amounts accrued to be remote. However, the ultimate liability for these matters is uncertain, and if accruals are not adequate, an adverse outcome could have a material effect on the Company's consolidated financial condition or results of operations. The Company maintains insurance coverage above certain limits. There are currently no matters pending against the Company or its subsidiaries for which the potential exposure is considered material to the Company's consolidated financial statements.
Commitments
The Company leases data processing equipment, office furniture and equipment, land and office space under noncancellable operating leases. The Company has a future commitment for lease payments over the next 24 years of $83.5 million.
Total rental expense on operating leases was $17.1 million, $14.7 million and $16.3 million for the fiscal years ended March 31, 2016, 2015 and 2014, respectively. Future minimum lease payments under all noncancellable operating leases for the five years ending March 31, 2021, are as follows: 2017, $15.5 million; 2018, $12.6 million; 2019, $11.1 million; 2020, $10.1 million; and 2021, $9.6 million.
In connection with the disposal of certain assets, the Company guaranteed a lease for the buyer of the assets. This guarantee was made by the Company primarily to facilitate favorable financing terms for the third party. Should the third party default, the Company would be required to perform under this guarantee. At March 31, 2016 the Company's maximum potential future payments under this guarantee were $0.5 million.
12.
STOCKHOLDERS' EQUITY:
The Company has authorized 200 million shares of $0.10 par value common stock and 1 million shares of $1.00 par value preferred stock. The board of directors of the Company may designate the relative rights and preferences of the preferred stock when and if issued. Such rights and preferences could include liquidation preferences, redemption rights, voting rights and dividends, and the shares could be issued in multiple series with different rights and preferences. The Company currently has no plans for the issuance of any shares of preferred stock.
At March 31, 2016 the Company had outstanding 4,942 warrants to purchase shares of its common stock. The outstanding warrants carry an exercise price of $13.24 and expire March 17, 2019.
On August 29, 2011, the board of directors adopted a common stock repurchase program. That program was subsequently modified and expanded, most recently on May 19, 2015. Under the modified common stock repurchase program, the Company may purchase up to $300.0 million of its common stock through the period ending December 31, 2016. During the fiscal year ended March 31, 2016, the Company repurchased 2.6 million shares of its common stock for $52.8 million. During the fiscal year ended March 31, 2015, the Company repurchased 0.5 million shares of its common stock for $9.9 million. During the fiscal year ended March 31, 2014, the Company repurchased 2.0 million shares of its common stock for $52.7 million. Through March 31, 2016, the Company has repurchased 15.5 million shares of its stock for $255.2 million, leaving remaining capacity of $44.8 million under the stock repurchase program.
The Company paid no dividends on its common stock for any of the years reported.
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
Share-based Compensation Plans
The Company has stock option and equity compensation plans, at March 31, 2016, for which a total of 28.9 million shares of the Company's common stock have been reserved for issuance since the inception of the plans. These plans provide that the exercise prices of qualified options will be at or above the fair market value of the common stock at the time of the grant. Board policy requires that nonqualified options also be priced at or above the fair market value of the common stock at the time of grant.
On May 13, 2013 the Company's compensation committee, acting on behalf of the full board of directors, approved an amendment to one of the Company's equity compensation plans which would permit the issuance of an additional 4,000,000 shares under the plan. That amendment received shareholder approval at the August 6, 2013 annual shareholders' meeting. On May 23, 2013, the board terminated one of the Company's equity compensation plans under which 1.7 million shares remained available for future grant. This plan termination did not require shareholder approval. On May 8, 2015, the Company's compensation committee, acting on behalf of the full board of directors, approved an amendment to one of the Company's equity compensation plans which would permit the issuance of an additional 4.1 million shares under the plan. That amendment received stockholder approval at the August 18, 2015 annual stockholders' meeting. At March 31, 2016, there were a total of 5.3 million shares available for future grants under the plans.
Stock Option Activity of Continuing Operations
The Company granted 445,785 stock options, having a per-share weighted-average fair value of $6.48, in fiscal 2016. This valuation was determined using a customized binomial lattice approach with the following weighted-average assumptions: dividend yield of 0.0%; risk-free interest rate of 2.2%; expected option life of 4.5 years; expected volatility of 40%; and a suboptimal exercise multiple of 1.4. The dividend yield was determined to be 0.0% since Acxiom is currently not paying dividends and there are no plans to pay dividends. The risk-free rate was determined by reference to the U.S. Treasury securities with a term equal to the life of the options. The expected option life is an output of the lattice model. The expected volatility was determined by considering both the historical volatility of Acxiom common stock, as well as the implied volatility of traded Acxiom options. The suboptimal exercise multiple was determined using actual historical exercise activity of Acxiom options.
The Company granted 415,639 stock options in fiscal 2015, exclusive of replacement options granted in connection with the LiveRamp acquisition. The per-share weighted-average fair value of the stock options granted during 2015 was $8.05. This valuation was determined using a customized binomial lattice approach with the following weighted-average assumptions: dividend yield of 0.0%; risk-free interest rate of 2.5%; expected option life of 4.4 years; expected volatility of 43%; and a suboptimal exercise multiple of 1.4.
The Company granted 312,778 stock options in fiscal 2014. The per-share weighted-average fair value of the stock options granted during 2014 was $7.00. This valuation was determined using a customized binomial lattice approach with the following weighted-average assumptions: dividend yield of 0.0%; risk-free interest rate of 2.1%; expected option life of 4.3 years; expected volatility of 35%; and a suboptimal exercise multiple of 1.3.
As part of the Company's acquisition of LiveRamp, the Company issued 1,473,668 replacement stock options to LiveRamp employees who had outstanding unvested stock options to purchase LiveRamp stock. The fair value of the replacement options was determined using a customized binomial lattice model with the following assumptions: dividend yield of 0.0% since Acxiom does not currently pay dividends; risk-free interest rates of from 1.57% to 2.54%, based on the rate of U.S. Treasury securities with a term equal to the remaining term of each option; remaining terms of each option of from 6.1 to 9.7 years; expected volatility of 43%, based on both the historical volatility of Acxiom stock, as well as the implied volatility of traded Acxiom options; and a suboptimal exercise multiple of 1.4, based on actual historical exercise activity of Acxiom options.
The number of shares of each replacement option and the exercise price of each replacement option was determined by converting LiveRamp options into equivalent Acxiom options by multiplying the number of shares subject to LiveRamp options by the exchange ratio of .63774 and by dividing the exercise price for each LiveRamp option by the exchange ratio of .63774. Once the value of each replacement option was determined, the percentage of that value which was attributed to employee service prior to the acquisition date was allocated to the purchase price of LiveRamp, and the remaining value will be expensed by the Company over the remaining vesting period of each option. The total included in the purchase price was $7.0 million (see note 3) and the total to be expensed in the future was $23.5 million, net of any forfeitures.
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
Stock option activity during the year ended March 31, 2016 was as follows:
|
|
Number
of shares
|
|
|
Weighted-average exercise price
per share
|
|
|
Weighted-average remaining contractual term (in years)
|
|
|
Aggregate intrinsic value
(in thousands)
|
|
Outstanding at March 31, 2015
|
|
|
4,870,219
|
|
|
$
|
15.10
|
|
|
|
|
|
|
|
Granted
|
|
|
445,785
|
|
|
$
|
17.84
|
|
|
|
|
|
|
|
Exercised
|
|
|
(923,958
|
)
|
|
$
|
8.51
|
|
|
|
|
|
$
|
10,746
|
|
Forfeited or cancelled
|
|
|
(787,944
|
)
|
|
$
|
27.05
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2016
|
|
|
3,604,102
|
|
|
$
|
14.52
|
|
|
|
5.20
|
|
|
$
|
25,883
|
|
Exercisable at March 31, 2016
|
|
|
2,486,647
|
|
|
$
|
14.62
|
|
|
|
3.90
|
|
|
$
|
17,777
|
|
The aggregate intrinsic value for options exercised in fiscal 2016, 2015, and 2014 was $10.7 million, $8.3 million, and $50.5 million, respectively. The aggregate intrinsic value at period end represents total pre-tax intrinsic value (the difference between Acxiom's closing stock price on the last trading day of the period and the exercise price for each in-the-money option) that would have been received by the option holders had option holders exercised their options on March 31, 2016. This amount changes based upon changes in the fair market value of Acxiom's stock.
Following is a summary of stock options outstanding as of March 31, 2016:
|
|
|
Options outstanding
|
|
|
Options exercisable
|
|
Range of
exercise price
per share
|
|
|
Options
outstanding
|
|
Weighted- average remaining contractual life
|
|
Weighted-average
exercise price
per share
|
|
|
Options
exercisable
|
|
|
Weighted-average
exercise price
per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.63 - $ 8.90
|
|
|
|
690,255
|
|
6.83 years
|
|
$
|
1.80
|
|
|
|
387,703
|
|
|
$
|
1.82
|
|
$
|
11.08 - $ 14.21
|
|
|
|
1,052,358
|
|
4.66 years
|
|
$
|
13.32
|
|
|
|
985,021
|
|
|
$
|
13.32
|
|
$
|
15.31 - $ 19.76
|
|
|
|
819,902
|
|
5.54 years
|
|
$
|
17.16
|
|
|
|
404,855
|
|
|
$
|
16.54
|
|
$
|
20.27 - $ 24.53
|
|
|
|
1,021,945
|
|
4.35 years
|
|
$
|
21.87
|
|
|
|
699,204
|
|
|
$
|
22.18
|
|
$
|
27.77 - $ 32.85
|
|
|
|
19,642
|
|
7.58 years
|
|
$
|
32.83
|
|
|
|
9,864
|
|
|
$
|
32.80
|
|
|
|
|
|
|
3,604,102
|
|
5.20 years
|
|
$
|
14.52
|
|
|
|
2,486,647
|
|
|
$
|
14.62
|
|
Total expense related to stock options was approximately $9.8 million in fiscal 2016, $12.0 million in fiscal 2015, and $2.2 million in fiscal 2014. Of the fiscal 2016 and 2015 expense, $6.7 million and $9.4 million, respectively, relates to LiveRamp replacement stock options. Future expense for all options is expected to be approximately $9.7 million in total over the next four years.
Stock Appreciation Right (SAR) Activity
During fiscal 2015, the Company granted 245,404 performance-based SARs with a value at the date of grant of $0.5 million and having an exercise price of $40. All of the performance-based SARs granted in fiscal 2015 vest subject to attainment of performance criteria established by the compensation committee. The units granted in fiscal 2015 may vest in a number of SARs up to 100% of the award, based on the attainment of certain revenue targets for the period from April 1, 2014 to March 31, 2017. At vesting, the SARs will be automatically exercised, and the award recipient may receive a number of common stock shares equal to the number of SARs that are being exercised multiplied by the quotient of (a) the final Company stock market value (up to a maximum share value of $70) minus the SAR exercise price, divided by (b) the fair market value of a share of stock at the exercise date. The SARs contain an accelerated exercise provision if the closing market price of the Company's stock exceeds the $70 maximum share value for 20 consecutive trading days during the performance period. The grant date value of the performance-based SARs is determined using a Monte Carlo simulation model.
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
Stock appreciation right (SAR) activity during the year ended March 31, 2016 was:
|
|
Number
of shares
|
|
|
Weighted-average exercise price
per share
|
|
|
Weighted-average remaining contractual term (in years)
|
|
|
Aggregate intrinsic value
(in thousands)
|
|
Outstanding at March 31, 2015
|
|
|
245,404
|
|
|
$
|
40.00
|
|
|
|
|
|
|
|
Outstanding at March 31, 2016
|
|
|
245,404
|
|
|
$
|
40.00
|
|
|
|
1.00
|
|
|
$
|
-
|
|
Exercisable at March 31, 2016
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
Total expense related to SARs in fiscal 2016 and 2015 was approximately $0.2 million in both periods. Future expense for these SARs is expected to be approximately $0.2 million over the next fiscal year.
Restricted Stock Unit Activity of Continuing Operations
Non-vested time-vesting restricted stock units activity during the year ended March 31, 2016 was:
|
|
Number
of shares
|
|
|
Weighted average fair value per
share at grant date
|
|
|
Weighted-average remaining contractual term (in years)
|
|
Outstanding at March 31, 2015
|
|
|
2,053,179
|
|
|
$
|
20.44
|
|
|
|
1.95
|
|
Granted
|
|
|
1,427,561
|
|
|
$
|
18.89
|
|
|
|
|
|
Vested
|
|
|
(975,744
|
)
|
|
$
|
20.16
|
|
|
|
|
|
Forfeited or cancelled
|
|
|
(225,101
|
)
|
|
$
|
19.41
|
|
|
|
|
|
Outstanding at March 31, 2016
|
|
|
2,279,895
|
|
|
$
|
19.69
|
|
|
|
2.12
|
|
During fiscal 2016, the Company granted time-vesting restricted stock units covering 1,427,561 shares of common stock with a value at the date of grant of $27.0 million. Of the restricted stock units granted in the current period, 1,041,572 vest in equal annual increments over four years, 70,799 vest in equal annual increments over two years, 72,650 vest in one year, and 242,540 vest in equal quarterly increments starting 15 months after the date of grant.
During fiscal 2015, the Company granted time-vesting restricted stock units covering 1,770,303 shares of common stock with a value at the date of grant of $37.6 million, of which units covering 1,075,392 shares, with a value at date of grant of $23.7 million, were granted to former LiveRamp employees subsequent to the acquisition of LiveRamp (see note 3). Of the restricted stock units granted in fiscal 2015, 773,735 vest in equal annual increments over four years, 927,052 vest in equal annual increments over two years, and 69,516 vest in one year.
During fiscal 2014, the Company granted time-vesting restricted stock units covering 502,008 shares of common stock with a value at the date of grant of $12.1 million. Of the restricted stock units granted in fiscal 2014, 421,111 vest in equal annual increments over four years, 25,000 vest in equal annual increments over two years, and 55,897 vest in one year.
Valuation of time-vesting restricted stock units for all periods presented is equal to the quoted market price for the shares on the date of grant. The total fair value of time-vesting restricted stock units vested in fiscal 2016, 2015, and 2014 was $17.6 million, $8.4 million, and $10.3 million, respectively and is measured as the quoted market price of the Company's common stock on the vesting date for the number of shares vested.
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
Non-vested performance-based restricted stock units activity during the year ended March 31, 2016 was:
|
|
Number
of shares
|
|
|
Weighted average fair value per
share at grant date
|
|
|
Weighted-average remaining contractual term (in years)
|
|
Outstanding at March 31, 2015
|
|
|
389,310
|
|
|
$
|
21.12
|
|
|
|
1.57
|
|
Granted
|
|
|
367,807
|
|
|
$
|
18.42
|
|
|
|
|
|
Forfeited or cancelled
|
|
|
(240,299
|
)
|
|
$
|
22.35
|
|
|
|
|
|
Outstanding at March 31, 2016
|
|
|
516,818
|
|
|
$
|
18.62
|
|
|
|
1.67
|
|
During fiscal 2016, the Company granted performance-based restricted stock units covering 367,807 shares of common stock with a value at the date of grant of $6.8 million. All of the performance-based restricted stock units granted in the current period vest subject to attainment of performance criteria established by the compensation committee. The units granted in the current period may vest in a number of shares from zero to 200% of the award, based on the attainment of an earnings-per-share target for fiscal 2018, with a modifier based on the total shareholder return of Acxiom common stock compared to total shareholder return of a group of peer companies established by the compensation committee for the period from April 1, 2015 to March 31, 2018. The value of the performance-based restricted stock units is determined using a Monte Carlo simulation model.
During fiscal 2015, the Company granted performance-based restricted stock units covering 263,609 shares of common stock with a value at the date of grant of $5.0 million. All of the performance-based restricted stock units granted in fiscal 2015 vest subject to attainment of performance criteria established by the compensation committee. The units granted in fiscal 2015 may vest in a number of shares from zero to 200% of the award, based on the attainment of an earnings-per-share target for fiscal 2017, with a modifier based on the total shareholder return of Acxiom stock compared to total shareholder return of a group of peer companies established by the compensation committee for the period from April 1, 2014 to March 31, 2017. The value of the performance units is determined using a Monte Carlo simulation model.
During fiscal 2014, the Company granted performance-based restricted stock units covering 230,319 shares of common stock with a value at the date of grant of $5.7 million. All of the performance-based restricted stock units granted in fiscal 2014 vest subject to attainment of performance criteria established by the compensation committee. All of the outstanding performance-based restricted stock units granted during fiscal 2014 were forfeited due to not achieving the earnings-per-share target for fiscal 2016. The value of the performance units is determined using a Monte Carlo simulation model.
There were no performance-based restricted stock units vested in fiscal 2016 and 2014. During fiscal 2015, 517,565 performance-based restricted stock units vested. Of the units vested, 109,273 vested due to attainment of performance and shareholder return targets established by the compensation committee in fiscal 2012. The remaining 408,292 units represent inducement awards granted to certain of the Company's chief executive officers.
The expense related to restricted stock in fiscal 2016, 2015 and 2014 was $19.4 million, $15.2 million and $11.0 million, respectively. Future expense for restricted stock units is expected to be approximately $19.9 million in fiscal 2017, $11.7 million in fiscal 2018, $5.4 million in fiscal 2019 and $1.4 million in fiscal 2020.
Other Performance Unit Activity
During fiscal 2016, the Company granted 323,080 performance-based units with a value at the date of grant of $0.9 million. All of the performance-based units granted vest subject to attainment of performance criteria established by the compensation committee. The units granted in the current period may vest in a number of units up to 100% of the award, based on the attainment of certain Company common stock share price targets for the period from July 1, 2015 to June 30, 2017. At vesting, the award recipient may receive a number of common stock shares equal to the number of units vested multiplied by a share price factor. The share price factor modifies the final number of common shares awarded based on the Company's stock price on the date of vesting and ranges from 0% at a $25 Company stock price, or below, to 100% at a $55 Company stock price. The grant date value of the performance-based units is determined using a Monte Carlo simulation model.
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
During fiscal 2015, the Company granted 312,575 performance-based units with a value at the date of grant of $1.6 million. All of the performance-based units granted in fiscal 2015 vest subject to attainment of performance criteria established by the compensation committee.
Of the units granted in fiscal 2015, 201,464 may vest in a number of units up to 100% of the award, based on the attainment of certain revenue targets for the period from April 1, 2014 to March 31, 2017. At vesting, the award recipient may receive a number of common stock shares equal to the number of units vested multiplied by a share price factor. The share price factor modifies the final number of common shares awarded based on the Company's stock price on the date of vesting and ranges from 0% at a $40 Company stock price, or below, to 100% at a $70 Company stock price. The units also contain an accelerated exercise provision if the closing market price of the Company's stock exceeds the $70 maximum share value for 20 consecutive trading days during the performance period. The grant date value of the performance-based units is determined using a Monte Carlo simulation model.
The remaining 111,111 units granted in fiscal 2015 may vest in a number of units up to 100% of the award, based on the attainment of certain revenue targets for the period from April 1, 2015 to March 31, 2018. At vesting, the award recipient may receive a number of common stock shares equal to the number of units vested multiplied by a share price factor. The share price factor modifies the final number of common shares awarded based on the Company's stock price on the date of vesting and ranges from 0% at a $25 Company stock price, or below, to 100% at a $45 Company stock price. The units also contain an accelerated exercise provision if the closing market price of the Company's stock exceeds the $45 maximum share value for 20 consecutive trading days during the performance period. The grant date value of the performance-based units is determined using a Monte Carlo simulation model.
Other performance unit activity during the year ended March 31, 2016 was:
|
|
Number
of shares
|
|
|
Weighted average fair value per
share at grant date
|
|
|
Weighted-average remaining contractual term (in years)
|
|
Outstanding at March 31, 2015
|
|
|
312,575
|
|
|
$
|
5.23
|
|
|
|
|
Granted
|
|
|
323,080
|
|
|
$
|
2.94
|
|
|
|
|
Outstanding at March 31, 2016
|
|
|
635,655
|
|
|
$
|
4.07
|
|
|
|
1.30
|
|
The expense related to other performance units in fiscal 2016 and 2015 was $0.9 and $0.3 million, respectively. Future expense for these performance units is expected to be approximately $1.4 million over the next two years.
Qualified Employee Stock Purchase Plan
In addition to the share-based plans, the Company maintains a qualified employee stock purchase plan ("ESPP") that permits substantially all employees to purchase shares of common stock at a discount from the market price. At March 31, 2016 there were approximately 0.8 million shares available for issuance under the ESPP.
During the combined fiscal years of 2016, 2015 and 2014, 125,698 shares were purchased under the plan. The total expense to the Company, representing the discount to the market price, for fiscal 2016 and 2015 was approximately $0.2 million and $0.1 million, respectively.
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
Accumulated Other Comprehensive Income
The accumulated balances for each component of other comprehensive income was (dollars in thousands):
|
|
March 31,
2016
|
|
|
March 31,
2015
|
|
Foreign currency translation
|
|
$
|
8,705
|
|
|
$
|
9,612
|
|
Unrealized loss on interest rate swap
|
|
|
(115
|
)
|
|
|
(199
|
)
|
|
|
$
|
8,590
|
|
|
$
|
9,413
|
|
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
13.
INCOME TAXES:
Total income tax expense (benefit) was allocated as follows (dollars in thousands):
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Loss from continuing operations
|
|
$
|
(11,632
|
)
|
|
$
|
(14,805
|
)
|
|
$
|
12,040
|
|
Earnings from discontinued operations
|
|
|
3,598
|
|
|
|
11,973
|
|
|
|
17,587
|
|
Stockholders' equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax shortfall (excess tax benefits) from stock-based compensation
|
|
|
293
|
|
|
|
(4,645
|
)
|
|
|
(11,295
|
)
|
|
|
$
|
(7,741
|
)
|
|
$
|
(7,477
|
)
|
|
$
|
18,332
|
|
Income tax expense (benefit) attributable to loss from continuing operations consists of (dollars in thousands):
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Current:
|
|
|
|
|
|
|
|
|
|
U.S. Federal
|
|
$
|
(2,410
|
)
|
|
$
|
(7,744
|
)
|
|
$
|
1,157
|
|
Non-U.S.
|
|
|
535
|
|
|
|
164
|
|
|
|
890
|
|
State
|
|
|
1,907
|
|
|
|
(2,260
|
)
|
|
|
(942
|
)
|
|
|
|
32
|
|
|
|
(9,840
|
)
|
|
|
1,105
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Federal
|
|
|
(3,789
|
)
|
|
|
(1,064
|
)
|
|
|
2,421
|
|
Non-U.S.
|
|
|
(3,220
|
)
|
|
|
326
|
|
|
|
7,641
|
|
State
|
|
|
(4,655
|
)
|
|
|
(4,227
|
)
|
|
|
873
|
|
|
|
|
(11,664
|
)
|
|
|
(4,965
|
)
|
|
|
10,935
|
|
Total
|
|
$
|
(11,632
|
)
|
|
$
|
(14,805
|
)
|
|
$
|
12,040
|
|
Loss before income tax attributable to U.S. and non-U.S. continuing operations consists of (dollars in thousands):
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
U.S.
|
|
$
|
(6,952
|
)
|
|
$
|
(24,459
|
)
|
|
$
|
872
|
|
Non-U.S.
|
|
|
(13,328
|
)
|
|
|
(16,888
|
)
|
|
|
(6,172
|
)
|
Total
|
|
$
|
(20,280
|
)
|
|
$
|
(41,347
|
)
|
|
$
|
(5,300
|
)
|
Earnings (loss) before income taxes, as shown above, are based on the location of the entity to which such earnings (loss) are attributable. However, since such earnings (loss) may be subject to taxation in more than one country, the income tax provision shown above as U.S. or non-U.S. may not correspond to the earnings (loss) shown above.
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
Below is a reconciliation of expected income tax benefit computed using the U.S. federal statutory income tax rate of 35% of loss before income taxes to actual income tax expense (benefit) from continuing operations (dollars in thousands):
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Computed expected tax benefit
|
|
$
|
(7,098
|
)
|
|
$
|
(14,472
|
)
|
|
$
|
(1,855
|
)
|
Increase (reduction) in income taxes resulting from:
|
|
|
|
|
|
|
|
|
|
|
|
|
State income taxes, net of federal benefit
|
|
|
(1,796
|
)
|
|
|
(441
|
)
|
|
|
(371
|
)
|
Research and other tax credits
|
|
|
(4,027
|
)
|
|
|
(6,369
|
)
|
|
|
(5,251
|
)
|
Impairment of goodwill and intangibles
|
|
|
-
|
|
|
|
-
|
|
|
|
5,368
|
|
Share-based compensation
|
|
|
1,857
|
|
|
|
2,276
|
|
|
|
-
|
|
Non-U.S. subsidiaries taxed at other than 35%
|
|
|
2,468
|
|
|
|
4,354
|
|
|
|
5,875
|
|
Adjustment to valuation allowances
|
|
|
(3,585
|
)
|
|
|
(776
|
)
|
|
|
7,604
|
|
Other, net
|
|
|
549
|
|
|
|
623
|
|
|
|
670
|
|
|
|
$
|
(11,632
|
)
|
|
$
|
(14,805
|
)
|
|
$
|
12,040
|
|
Due to changes in management's assessment of the realizability of deferred tax assets in certain foreign jurisdictions, the Company released $3.6 million in valuation allowances in fiscal 2016 and increased valuation allowances by $7.6 million in fiscal 2014.
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at March 31, 2016 and 2015 are presented below (dollars in thousands). In accordance with income tax accounting standards, as of March 31, 2016, the Company has not recognized deferred income taxes on approximately $12.7 million of undistributed earnings of foreign subsidiaries that are indefinitely reinvested outside the respective parent's country. Calculation of the deferred income tax related to these earnings is not practicable.
|
|
2016
|
|
|
2015
|
|
Deferred tax assets:
|
|
|
|
|
|
|
Accrued expenses
|
|
$
|
11,525
|
|
|
$
|
10,041
|
|
Deferred revenue
|
|
|
1,612
|
|
|
|
2,715
|
|
Net operating loss and tax credit carryforwards
|
|
|
57,370
|
|
|
|
60,893
|
|
Share-based compensation
|
|
|
12,706
|
|
|
|
11,993
|
|
Other
|
|
|
5,242
|
|
|
|
6,838
|
|
Total deferred tax assets
|
|
|
88,455
|
|
|
|
92,480
|
|
Less valuation allowance
|
|
|
(46,602
|
)
|
|
|
(49,922
|
)
|
Net deferred tax assets
|
|
|
41,853
|
|
|
|
42,558
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Intangible assets
|
|
$
|
(65,084
|
)
|
|
$
|
(75,104
|
)
|
Capitalized software costs
|
|
|
(14,143
|
)
|
|
|
(15,862
|
)
|
Property and equipment
|
|
|
(9,705
|
)
|
|
|
(6,651
|
)
|
Total deferred tax liabilities
|
|
|
(88,932
|
)
|
|
|
(97,617
|
)
|
Net deferred tax liabilities
|
|
$
|
(47,079
|
)
|
|
$
|
(55,059
|
)
|
At March 31, 2016, the Company has net operating loss carryforwards of approximately $5.6 million and $70.9 million for U.S. federal and state income tax purposes, respectively. These net operating loss carryforwards expire in various amounts and will completely expire if not used by 2036. The Company has foreign net operating loss carryforwards of approximately $130.9 million. Of this amount, $130.0 million do not have expiration dates. The remainder expires in various amounts and will completely expire if not used by 2025. The Company has federal and state credit carryforwards of $3.5 million and $17.5 million, respectively, of which $0.9 million and $1.5 million, respectively, will be credited to additional paid-in capital when realized. Of the credits, $5.1 million will not expire. The remainder expires in various amounts and will completely expire if not used by 2036.
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
Based upon the Company's history of profitability and taxable income and the reversal of taxable temporary differences in the U.S., management believes that with the exception of carryforwards in certain states it is more likely than not the Company will realize the benefits of these deductible differences. The Company has established valuation allowances against $6.0 million of deferred tax assets related to loss and credit carryforwards in the states where activity does not support the deferred tax asset.
Based upon the Company's history of losses in certain non-U.S. jurisdictions, the Company has not recorded a benefit for current foreign losses in these jurisdictions. In addition, Management believes it is not more likely than not the Company will realize the benefits of certain foreign loss carryforwards and has established valuation allowances in the amount of $40.6 million against all of its foreign deferred tax assets in such jurisdictions. No valuation allowance has been established against deferred tax assets in non-U.S. jurisdictions in which historical profits and forecasted continuing profits exist. The earnings of subsidiaries in such jurisdictions and the differences in income taxes computed using the U.S. statutory tax rate and the effective tax rate in such jurisdictions are not significant.
The following table sets forth changes in the total gross unrecognized tax benefits for the fiscal years ended March 31, 2016, 2015 and 2014 (dollars in thousands):
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Balance at beginning of period
|
|
$
|
9,711
|
|
|
$
|
2,457
|
|
|
$
|
3,646
|
|
Increases related to prior year tax positions
|
|
|
1,717
|
|
|
|
292
|
|
|
|
946
|
|
Decreases related to prior year tax positions
|
|
|
(1,227
|
)
|
|
|
(83
|
)
|
|
|
-
|
|
Increases related to current year tax positions
|
|
|
2,035
|
|
|
|
4,339
|
|
|
|
902
|
|
Increases resulting from acquisitions
|
|
|
-
|
|
|
|
2,887
|
|
|
|
-
|
|
Settlements with taxing authorities
|
|
|
(1,330
|
)
|
|
|
-
|
|
|
|
-
|
|
Lapse of statute of limitations
|
|
|
-
|
|
|
|
(181
|
)
|
|
|
(3,037
|
)
|
Balance at end of period
|
|
$
|
10,906
|
|
|
$
|
9,711
|
|
|
$
|
2,457
|
|
The total amount of gross unrecognized tax benefits as of March 31, 2016 was $10.9 million, of which up to $8.8 million would reduce the Company's effective tax rate in future periods if and when realized. The Company reports accrued interest and penalties related to unrecognized tax benefits in income tax expense. The combined amount of accrued interest and penalties related to tax positions on tax returns was approximately $0.3 million as of March 31, 2016. There was no material change in accrued interest and penalties during fiscal year 2016. The Company does not anticipate any reduction of unrecognized tax benefits within the next 12 months.
The Company files a consolidated U.S. federal income tax return and tax returns in various state and local jurisdictions. The Company's subsidiaries also file tax returns in various foreign jurisdictions in which it operates. In the U.S., the statute of limitations for Internal Revenue Service examinations remains open for the Company's federal income tax returns for fiscal years subsequent to 2012. The status of state and local and foreign tax examinations varies by jurisdiction. The Company does not anticipate any material adjustments to its financial statements resulting from tax examinations currently in progress.
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
14.
RETIREMENT PLANS:
The Company has a qualified 401(k) retirement savings plan which covers substantially all U.S. employees. The Company also offers a supplemental nonqualified deferred compensation plan ("SNQDC Plan") for certain highly-compensated employees. The Company matches 50% of the first 6% of employee's annual aggregate contributions. The Company may also contribute additional amounts to the plans at the discretion of the board of directors.
Company contributions for the above plans amounted to approximately $6.1 million, $5.3 million and $4.6 million in fiscal years 2016, 2015 and 2014, respectively. Included in both other current assets and other accrued liabilities are the assets and liabilities of the SNQDC Plan in the amount of $12.5 million and $14.2 million at March 31, 2016 and 2015, respectively.
The Company has one small defined benefit pension plan covering certain employees in Germany. Both the projected benefit obligation and accumulated benefit obligation were $0.4 million and $0.5 million as of March 31, 2016 and 2015, respectively. There were no plan assets as of either March 31, 2016 or March 31, 2015, resulting in an excess of benefit obligations over plan assets of $0.4 million at March 31, 2016 and $0.5 million at March 31, 2015.
15.
FOREIGN OPERATIONS:
The Company attributes revenue to each geographic region based on the location of the Company's operations. The following table shows financial information by geographic area for the years 2016, 2015 and 2014 (dollars in thousands):
Revenue
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
United States
|
|
$
|
770,043
|
|
|
$
|
709,133
|
|
|
$
|
692,773
|
|
Foreign
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe
|
|
$
|
52,562
|
|
|
$
|
59,958
|
|
|
$
|
73,294
|
|
APAC
|
|
|
25,138
|
|
|
|
32,658
|
|
|
|
34,540
|
|
Other
|
|
|
2,345
|
|
|
|
3,162
|
|
|
|
4,546
|
|
All Foreign
|
|
$
|
80,045
|
|
|
$
|
95,778
|
|
|
$
|
112,380
|
|
|
|
$
|
850,088
|
|
|
$
|
804,911
|
|
|
$
|
805,153
|
|
Long-lived assets excluding financial instruments (dollars in thousands)
|
|
March 31, 2016
|
|
|
March 31, 2015
|
|
United States
|
|
$
|
748,123
|
|
|
$
|
749,591
|
|
Foreign
|
|
|
|
|
|
|
|
|
Europe
|
|
$
|
11,899
|
|
|
$
|
11,466
|
|
APAC
|
|
|
13,817
|
|
|
|
20,682
|
|
Other
|
|
|
-
|
|
|
|
944
|
|
All Foreign
|
|
$
|
25,716
|
|
|
$
|
33,092
|
|
|
|
$
|
773,839
|
|
|
$
|
782,683
|
|
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
16.
FAIR VALUE OF FINANCIAL INSTRUMENTS:
The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value.
Cash and cash equivalents, trade receivables, unbilled and notes receivable, short-term borrowings and trade payables - The carrying amount approximates fair value because of the short maturity of these instruments.
Long-term debt - The interest rate on the term loan and revolving credit agreement is adjusted for changes in market rates and therefore the carrying value of these loans approximates fair value. The estimated fair value of other long-term debt was determined based upon the present value of the expected cash flows considering expected maturities and using interest rates currently available to the Company for long-term borrowings with similar terms. At March 31, 2016, the estimated fair value of long-term debt approximates its carrying value.
Derivative instruments included in other liabilities - The carrying value is adjusted to fair value through other comprehensive income (loss) at each balance sheet date. The fair value is determined from an interest-rate futures model.
Under applicable accounting standards financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurements. The Company assigned assets and liabilities to the hierarchy in the accounting standards, which is Level 1 - quoted prices in active markets for identical assets or liabilities, Level 2 - significant other observable inputs and Level 3 - significant unobservable inputs.
The following table presents the balances of financial assets and liabilities measured at fair value as of March 31, 2016 and 2015 (dollars in thousands):
As of March 31, 2016
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Other current assets
|
|
$
|
12,532
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
12,532
|
|
Total assets
|
|
$
|
12,532
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
12,532
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other accrued expenses
|
|
$
|
-
|
|
|
$
|
115
|
|
|
$
|
-
|
|
|
$
|
115
|
|
Total liabilities
|
|
$
|
-
|
|
|
$
|
115
|
|
|
$
|
-
|
|
|
$
|
115
|
|
As of March 31, 2015
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Other current assets
|
|
$
|
14,174
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
14,174
|
|
Total assets
|
|
$
|
14,174
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
14,174
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other noncurrent liabilities
|
|
$
|
-
|
|
|
$
|
199
|
|
|
$
|
-
|
|
|
$
|
199
|
|
Total liabilities
|
|
$
|
-
|
|
|
$
|
199
|
|
|
$
|
-
|
|
|
$
|
199
|
|
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
17.
SEGMENT INFORMATION:
The Company reports segment information consistent with the way management internally disaggregates its operations to assess performance and to allocate resources.
During the first quarter of fiscal 2016, the Company realigned its organizational structure to better reflect its business strategy. On May 20, 2015, the Company entered into a definitive agreement to sell its ITO business to Charlesbank Capital Partners and M/C Partners to more sharply focus on growing our Marketing & Data Services businesses. The sale was completed on July 31, 2015. As a result of this transaction and the organizational realignment, information that our chief operating decision maker regularly reviews for purposes of allocating resources and assessing performance changed. Thus, beginning in fiscal year 2016, the Company began reporting its financial performance based on the following new segments: Marketing Services and Audience Solutions, and Connectivity. During the third quarter of fiscal 2016, the operational and financial activities to separate Marketing Services and Audience Solutions were completed and as a result are now reported as separate operating segments. Prior period amounts have been adjusted to conform to the way the Company internally managed and monitored segment performance during the current fiscal year.
Revenue and cost of revenue are generally directly attributed to the segments. Certain revenue contracts are allocated among the segments based on the relative value of the underlying products and services. Cost of revenue, excluding non-cash stock compensation expense and purchased intangible asset amortization, is directly charged in most cases and allocated in certain cases based upon proportional usage.
Operating expenses, excluding non-cash stock compensation expense and purchased intangible asset amortization, are attributed to the segment groups as follows:
·
|
Research and development expenses are primarily directly recorded to each segment group based on identified products supported.
|
·
|
Sales and marketing expenses are primarily directly recorded to each segment group based on products supported and sold.
|
·
|
General and administrative expenses are generally not allocated to the segments unless directly attributable.
|
·
|
Gains, losses and other items, net are not allocated to the segment groups.
|
We do not track our assets by operating segments. Consequently, it is not practical to show assets by operating segment.
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
The following table presents information by business segment (dollars in thousands). The prior-year segment information has been restated to conform to the new segment presentation:
|
|
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Marketing Services
|
|
$
|
449,772
|
|
|
$
|
446,103
|
|
|
$
|
465,572
|
|
Audience Solutions
|
|
|
297,846
|
|
|
|
303,836
|
|
|
|
325,932
|
|
Connectivity
|
|
|
102,470
|
|
|
|
54,972
|
|
|
|
13,649
|
|
Total segment revenues
|
|
$
|
850,088
|
|
|
$
|
804,911
|
|
|
$
|
805,153
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
(1)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketing Services
|
|
$
|
152,258
|
|
|
$
|
156,395
|
|
|
$
|
150,533
|
|
Audience Solutions
|
|
|
167,715
|
|
|
|
158,386
|
|
|
|
162,369
|
|
Connectivity
|
|
|
61,199
|
|
|
|
13,322
|
|
|
|
(11,688
|
)
|
Total segment gross profit
|
|
$
|
381,172
|
|
|
$
|
328,103
|
|
|
$
|
301,214
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
(1)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketing Services
|
|
$
|
74,371
|
|
|
$
|
81,247
|
|
|
$
|
83,771
|
|
Audience Solutions
|
|
|
109,598
|
|
|
|
115,078
|
|
|
|
119,950
|
|
Connectivity
|
|
|
(3,298
|
)
|
|
|
(40,069
|
)
|
|
|
(46,767
|
)
|
Total segment income from operations
|
|
$
|
180,671
|
|
|
$
|
156,256
|
|
|
$
|
156,954
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketing Services
|
|
$
|
9,988
|
|
|
$
|
12,280
|
|
|
$
|
7,763
|
|
Audience Solutions
|
|
|
12,909
|
|
|
|
12,652
|
|
|
|
14,991
|
|
Connectivity
|
|
|
19,932
|
|
|
|
16,469
|
|
|
|
3,061
|
|
Corporate
|
|
|
42,634
|
|
|
|
39,046
|
|
|
|
31,085
|
|
Total depreciation and amortization
|
|
$
|
85,463
|
|
|
$
|
80,447
|
|
|
$
|
56,900
|
|
(1)
Gross profit and Income (loss) from operations reflect only the direct and allocable controllable costs of each segment and do not include allocations of corporate expenses (primarily general and administrative expenses) and gains, losses, and other items, net. Additionally, Gross profit and Income (loss) from operations do not reflect non-cash stock compensation expense and purchased intangible asset amortization.
|
|
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
The following table reconciles total operating segment gross profit to gross profit and total operating segment income from operations to loss from operations:
|
|
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
Total segment gross profit
|
|
$
|
381,172
|
|
|
$
|
328,103
|
|
|
$
|
301,214
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased intangible asset amortization
|
|
|
15,466
|
|
|
|
11,454
|
|
|
|
-
|
|
Non-cash stock compensation
|
|
|
2,150
|
|
|
|
1,459
|
|
|
|
1,578
|
|
Corporate expenses
|
|
|
1,850
|
|
|
|
4,316
|
|
|
|
-
|
|
Gross profit
|
|
$
|
361,706
|
|
|
$
|
310,874
|
|
|
$
|
299,636
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment income from operations
|
|
$
|
180,671
|
|
|
$
|
156,256
|
|
|
$
|
156,954
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate expenses
|
|
|
127,844
|
|
|
|
126,570
|
|
|
|
99,818
|
|
Gains, losses and other items, net
|
|
|
12,132
|
|
|
|
22,600
|
|
|
|
17,168
|
|
Impairment of goodwill and other
|
|
|
6,829
|
|
|
|
-
|
|
|
|
24,953
|
|
Purchased intangible asset amortization
|
|
|
15,466
|
|
|
|
11,454
|
|
|
|
252
|
|
Non-cash stock compensation
|
|
|
31,463
|
|
|
|
28,316
|
|
|
|
13,206
|
|
Income (loss) from operations
|
|
$
|
(13,063
|
)
|
|
$
|
(32,684
|
)
|
|
$
|
1,557
|
|
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016, 2015 AND 2014
18.
UNAUDITED SELECTED QUARTERLY FINANCIAL DATA:
The following tables contain selected unaudited statement of operations information for each quarter of 2016 and 2015. The following information reflects all normal recurring adjustments necessary for a fair presentation of the information for the periods presented. The operating results for any quarter are not necessarily indicative of results for any future period. Unaudited quarterly results are as follows:
(dollars in thousands except per-share amounts)
|
|
Quarter ended
June 30,
2015
|
|
|
Quarter ended September 30, 2015
|
|
|
Quarter ended December 31,
2015
|
|
|
Quarter ended
March 31,
2016
|
|
Revenue
|
|
$
|
196,895
|
|
|
$
|
207,345
|
|
|
$
|
221,193
|
|
|
$
|
224,655
|
|
Gross profit
|
|
|
79,186
|
|
|
|
86,033
|
|
|
|
95,458
|
|
|
|
101,029
|
|
Loss from operations
|
|
|
(2,869
|
)
|
|
|
(2,056
|
)
|
|
|
(374
|
)
|
|
|
(7,764
|
)
|
Earnings (loss) from discontinued operations, net of tax
|
|
|
4,143
|
|
|
|
12,068
|
|
|
|
(971
|
)
|
|
|
111
|
|
Net earnings (loss)
|
|
|
(1,039
|
)
|
|
|
10,723
|
|
|
|
(1,410
|
)
|
|
|
(1,571
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
(0.07
|
)
|
|
|
(0.02
|
)
|
|
|
(0.01
|
)
|
|
|
(0.02
|
)
|
Discontinued operations
|
|
|
0.05
|
|
|
|
0.15
|
|
|
|
(0.01
|
)
|
|
|
0.00
|
|
Net earnings (loss)
|
|
|
(0.01
|
)
|
|
|
0.14
|
|
|
|
(0.02
|
)
|
|
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
(0.07
|
)
|
|
|
(0.02
|
)
|
|
|
(0.01
|
)
|
|
|
(0.02
|
)
|
Discontinued operations
|
|
|
0.05
|
|
|
|
0.15
|
|
|
|
(0.01
|
)
|
|
|
0.00
|
|
Net earnings (loss)
|
|
|
(0.01
|
)
|
|
|
0.14
|
|
|
|
(0.02
|
)
|
|
|
(0.02
|
)
|
(dollars in thousands except per-share amounts)
|
|
Quarter ended
June 30,
2014
|
|
|
Quarter ended September 30, 2014
|
|
|
Quarter ended December 31,
2014
|
|
|
Quarter ended
March 31,
2015
|
|
Revenue
|
|
$
|
186,683
|
|
|
$
|
204,248
|
|
|
$
|
208,246
|
|
|
$
|
205,734
|
|
Gross profit
|
|
|
71,119
|
|
|
|
79,290
|
|
|
|
82,439
|
|
|
|
78,026
|
|
Loss from operations
|
|
|
(13,086
|
)
|
|
|
(6,443
|
)
|
|
|
(2,290
|
)
|
|
|
(10,865
|
)
|
Earnings from discontinued operations, net of tax
|
|
|
3,137
|
|
|
|
5,557
|
|
|
|
3,819
|
|
|
|
2,998
|
|
Net earnings (loss)
|
|
|
(7,604
|
)
|
|
|
(1,544
|
)
|
|
|
4,156
|
|
|
|
(6,039
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
(0.14
|
)
|
|
|
(0.09
|
)
|
|
|
0.00
|
|
|
|
(0.12
|
)
|
Discontinued operations
|
|
|
0.04
|
|
|
|
0.07
|
|
|
|
0.05
|
|
|
|
0.04
|
|
Net earnings (loss)
|
|
|
(0.10
|
)
|
|
|
(0.02
|
)
|
|
|
0.05
|
|
|
|
(0.08
|
)
|
Diluted earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From continuing operations
|
|
|
(0.14
|
)
|
|
|
(0.09
|
)
|
|
|
0.00
|
|
|
|
(0.12
|
)
|
From discontinued operations
|
|
|
0.04
|
|
|
|
0.07
|
|
|
|
0.05
|
|
|
|
0.04
|
|
Net earnings (loss)
|
|
|
(0.10
|
)
|
|
|
(0.02
|
)
|
|
|
0.05
|
|
|
|
(0.08
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Some earnings (loss) per share amounts may not add due to rounding.
|
|
F-72