ACXM Acxiom Holdngs (delisted)

Acxiom(R) Corporation (Nasdaq: ACXM) today announced financial results for the first quarter of fiscal 2007 ended June 30, 2006. Acxiom will hold a conference call at 4:30 p.m. CDT today to discuss this information further. Interested parties are invited to listen to the call, which will be broadcast via the Internet at www.acxiom.com. Year over year, first-quarter earnings per diluted share increased 186 percent to $0.20. Consolidated net earnings for the quarter increased 168 percent to $17.8 million. First-quarter revenue totaled $336.7 million, representing an 8.5 percent increase over the same quarter last year. "Our first-quarter results were strong and in line with our long-term Financial Road Map. These results reflect the growing strength of our company and the benefits from our ongoing initiatives to transform Acxiom," Company Leader Charles D. Morgan said. "Our first-quarter operating income increased 143 percent over the same quarter last year, and our overall revenue growth of 8.5 percent was led by a 9.8 percent increase in our services business. We are clearly on the right path operationally and will continue to stay focused on executing our priority initiatives to deliver superior financial performance." Highlights of Acxiom's first-quarter performance include: -- Revenue of $336.7 million, up 8.5 percent from $310.3 million in the first quarter a year ago. -- Income from operations of $36.3 million, a 143 percent increase compared to $15.0 million in the first quarter last year. -- Pre-tax earnings of $29.2 million, up 173 percent from $10.7 million in the first quarter of fiscal 2006. -- Diluted earnings per share of $.20, a 186 percent increase compared to $.07 in the first quarter last year. -- Operating cash flow of $56.4 million and free cash flow available to equity of $11.9 million. The free cash flow available to equity of $11.9 million is a non-GAAP financial measure, and a reconciliation to the comparable GAAP measure, operating cash flow, is attached to this press release. -- Services gross margin increased to 25.1 percent from 18.5 percent in the same quarter last year and from 23.7 percent in the sequential quarter ended March 31, 2006. -- Computer and related expense continued to decline as a percentage of revenue. This key performance metric fell to 21.7 percent versus 25.0 percent in the first quarter last year. -- Share repurchases for the quarter were approximately 576,000 shares for a total value of approximately $13.9 million. "Our revenue and operating income are record results for the first fiscal quarter," Morgan continued. "We are pleased with our performance in the first quarter, but we believe we have considerable opportunity to improve operating performance and deliver additional growth through execution of our long-term strategies." Morgan noted that Acxiom recently completed new contracts with General Motors Corporation; AutoNation, Inc.; Unilever; Yellow Book USA; AccuData and Southern Progress Corporation. Outlook The Company's expectations are communicated in the Financial Road Map, which includes a chart summarizing the one-year and long-term goals as well as an explanation of the assumptions and definitions that accompany these goals. Acxiom's current Financial Road Map has been updated to reflect changes to the free cash flow definition and reflects the Company's current expectations for fiscal year 2007, and the long-term goals reflect expected performance in fiscal 2010. These financial projections are based on the assumptions and limitations set forth in the Financial Road Map. These projections are forward looking, and actual results may differ materially. These projections may be impacted by mergers, acquisitions, divestitures or other business combinations that may be completed in the future as well as the other factors set forth below. About Acxiom Acxiom Corporation (Nasdaq: ACXM) integrates data, services and technology to create and deliver customer and information management solutions for many of the largest, most respected companies in the world. The core components of Acxiom's innovative solutions are Customer Data Integration (CDI) technology, data, database services, IT outsourcing, consulting and analytics, and privacy leadership. Founded in 1969, Acxiom is headquartered in Little Rock, Arkansas, with locations throughout the United States and Europe, and in Australia and China. For more information, visit www.acxiom.com. This release and today's conference call contain forward-looking statements that are subject to certain risks and uncertainties that could cause actual results to differ materially. Such statements may include but are not necessarily limited to the following: that the Company is continuing to experience continued improvement and momentum in financial performance, that we expect that continued focus on expense controls will lead to continued improvement in operating margins, that the projected revenue, operating margin, return on assets and return on invested capital, operating cash flow and free cash flow, borrowings, dividends and other metrics referred to in the Financial Road Map attached to this release will be within the estimated ranges; that the company has identified categories of opportunity that provide upside to the ranges of the Financial Road Map, that the estimations of revenue, earnings, cash flow, growth rates, restructuring charges and expense reductions will be within the estimated ranges; and that the business pipeline and our anticipated cost structure will allow us to continue to meet or exceed revenue, cash flow and other projections. The following are important factors, among others, that could cause actual results to differ materially from these forward-looking statements: The possibility that we may incur expenses related to unsolicited proposals or other efforts by others to acquire or control the Company; certain contracts may not be closed, or may not be closed within the anticipated time frames; the possibility that due to issues attendant to the current proxy contest clients may attempt to reduce the amount of business they do with the Company; the possibility that a significant disruption to the business of the Company may result from the current proxy contest; the possibility that in the event that a change of control was sought that certain of the clients of the Company would invoke certain provisions in their contracts resulting in a decline in the revenue and profit of the company; the possibility that certain contracts may not generate the anticipated revenue or profitability; the possibility that negative changes in economic or other conditions might lead to a reduction in demand for our products and services; the possibility of an economic slowdown or that economic conditions in general will not be as expected; the possibility that the historical seasonality of our business may change; the possibility that significant customers may experience extreme, severe economic difficulty; the possibility that the integration of acquired businesses may not be as successful as planned; the possibility that the fair value of certain of our assets may not be equal to the carrying value of those assets now or in future time periods; the possibility that sales cycles may lengthen; the possibility that we may not be able to attract and retain qualified technical and leadership associates, or that we may lose key associates to other organizations; the possibility that we won't be able to properly motivate our sales force or other associates; the possibility that we won't be able to achieve cost reductions and avoid unanticipated costs; the possibility that we won't be able to continue to receive credit upon satisfactory terms and conditions; the possibility that competent, competitive products, technologies or services will be introduced into the marketplace by other companies; the possibility that we may be subjected to pricing pressure due to market conditions and/or competitive products and services; the possibility that there will be changes in consumer or business information industries and markets that negatively impact the Company; the possibility that changes in accounting pronouncements may occur and may impact these projections; the possibility that we won't be able to protect proprietary information and technology or to obtain necessary licenses on commercially reasonable terms; the possibility that we may encounter difficulties when entering new markets or industries; the possibility that there will be changes in the legislative, accounting, regulatory and consumer environments affecting our business, including but not limited to litigation, legislation, regulations and customs relating to our ability to collect, manage, aggregate and use data; the possibility that data suppliers might withdraw data from us, leading to our inability to provide certain products and services; the possibility that we may enter into short-term contracts which would affect the predictability of our revenues; the possibility that the amount of ad hoc, volume-based and project work will not be as expected; the possibility that we may experience a loss of data center capacity or interruption of telecommunication links or power sources; the possibility that we may experience failures or breaches of our network and data security systems, leading to potential adverse publicity, negative customer reaction, or liability to third parties; the possibility that postal rates may increase, thereby leading to reduced volumes of business; the possibility that our clients may cancel or modify their agreements with us; the possibility that we will not successfully complete customer contract requirements on time or meet the service levels specified in the contracts, which may result in contract penalties or lost revenue; the possibility that we experience processing errors which result in credits to customers, re-performance of services or payment of damages to customers; the possibility that the services of the United States Postal Service, their global counterparts and other delivery systems may be disrupted; and the possibility that we may be affected by other competitive factors. With respect to the Financial Road Map, all of the above factors apply, along with the following which were assumptions made in creating the Financial Road Map: that the U.S. and global economies will continue to improve at a moderate pace; that global growth will continue to be strong and that globalization trends will continue to grow at an increasing pace; that Acxiom's computer and communications related expenses will continue to fall as a percentage of revenue; that the Customer Information Infrastructure (CII) grid-based environment Acxiom will continue to be implemented successfully over the next 3-4 years and that the new CII infrastructure will continue to provide increasing operational efficiencies; that the acquisitions of companies operating primarily outside of the United States will be successfully integrated and that significant efficiencies will be realized from this integration; relating to operating cash flow and free cash flow, that sufficient operating and capital lease arrangements will continue to be available to the Company to provide for the financing of most of its computer equipment and that software suppliers will continue to provide financing arrangements for most of the software purchases; relating to revolving credit line balance, that free cash flow will meet expectations and that the Company will use free cash flow to pay down bank debt, buy back stock and fund dividends; relating to annual dividends, that the Board of Directors will continue to approve quarterly dividends and will vote to increase dividends over time; relating to diluted shares, that the Company will meet its cash flow expectations and that potential dilution created through the issuance of stock options and warrants will be mitigated by continued stock repurchases in accordance with the Company's stock repurchase program. With respect to the provision of products or services outside our primary base of operations in the United States, all of the above factors apply, along with the difficulty of doing business in numerous sovereign jurisdictions due to differences in scale, competition, culture, laws and regulations. Other factors are detailed from time to time in our periodic reports and registration statements filed with the United States Securities and Exchange Commission. We believe that we have the product and technology offerings, facilities, associates and competitive and financial resources for continued business success, but future revenues, costs, margins and profits are all influenced by a number of factors, including those discussed above, all of which are inherently difficult to forecast. We undertake no obligation to update the information contained in this press release, including the Financial Road Map or any other forward-looking statement. Acxiom is a registered trademark of Acxiom Corporation. -0- *T ACXIOM CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Dollars in thousands, except earnings per share) For the Three Months Ended June 30, ----------------------------------- $ % 2006 2005 Variance Variance -------- -------- ----------------- Revenue: Services 261,892 238,499 23,393 9.8% Data 74,813 71,772 3,041 4.2% -------- -------- Total revenue 336,705 310,271 26,434 8.5% Operating costs and expenses: Cost of revenue Services 196,073 194,349 1,724 0.9% Data 49,572 48,885 687 1.4% -------- -------- Total cost of revenue 245,645 243,234 2,411 1.0% Services gross margin 25.1% 18.5% Data gross margin 33.7% 31.9% Total gross margin 27.0% 21.6% Selling, general and administrative 54,745 53,700 1,045 1.9% Gains, losses and nonrecurring items, net - (1,637) 1,637 0.0% -------- -------- Total operating costs and expenses 300,390 295,297 5,093 1.7% -------- -------- Income from operations 36,315 14,974 21,341 142.5% -------- -------- Other income (expense): Interest expense (7,769) (5,162) (2,607) 50.5% Other, net 647 891 (244) (27.4%) -------- -------- Total other income (expense) (7,122) (4,271) (2,851) 66.8% -------- -------- Earnings before income taxes 29,193 10,703 18,490 172.8% Income taxes 11,385 4,064 7,321 180.1% -------- -------- Net earnings 17,808 6,639 11,169 168.2% ======== ======== Earnings per share: Basic 0.20 0.07 0.13 185.7% ======== ======== Diluted 0.20 0.07 0.13 185.7% ======== ======== ACXIOM CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Dollars in thousands, except earnings per share) For the Three Months Ended ----------------------------------- June 30, March 31, $ % 2006 2006 Variance Variance ----------------------------------- Revenue: Services 261,892 257,591 4,301 1.7% Data 74,813 86,752 (11,939) (13.8%) -------- -------- Total revenue 336,705 344,343 (7,638) (2.2%) Operating costs and expenses: Cost of revenue Services 196,073 196,428 (355) (0.2%) Data 49,572 52,142 (2,570) (4.9%) -------- -------- Total cost of revenue 245,645 248,570 (2,925) (1.2%) Services gross margin 25.1% 23.7% Data gross margin 33.7% 39.9% Total gross margin 27.0% 27.8% Selling, general and administrative 54,745 51,642 3,103 6.0% Gains, losses and nonrecurring items, net - (456) 456 (100.0%) -------- -------- Total operating costs and expenses 300,390 299,756 634 0.2% -------- -------- Income from operations 36,315 44,587 (8,272) (18.6%) -------- -------- Other income (expense): Interest expense (7,769) (7,531) (238) 3.2% Other, net 647 135 512 379.3% -------- -------- Total other income (expense) (7,122) (7,396) 274 (3.7%) -------- -------- Earnings before income taxes 29,193 37,191 (7,998) (21.5%) Income taxes 11,385 14,132 (2,747) (19.4%) -------- -------- Net earnings 17,808 23,059 (5,251) (22.8%) ======== ======== Earnings per share: Basic 0.20 0.27 (0.07) (25.9%) ======== ======== Diluted 0.20 0.26 (0.06) (23.1%) ======== ======== ACXIOM CORPORATION AND SUBSIDIARIES CALCULATION OF EARNINGS PER SHARE (Unaudited) (In thousands, except earnings per share) For the Three Months Ended June 30, June 30, March 31, 2006 2005 2006 ------- ------- ------- Basic earnings per share: Numerator - net earnings 17,808 6,639 23,059 Denominator - weighted-average shares outstanding 88,155 91,044 86,981 ------- ------- ------- Basic earnings per share 0.20 0.07 0.27 ======= ======= ======= Diluted earnings per share: Numerator - net earnings Net earnings 17,808 6,639 23,059 Denominator: Weighted-average shares outstanding 88,155 91,044 86,981 Dilutive effect of common stock options, warrants and restricted stock 2,268 2,752 2,855 ------- ------- ------- 90,423 93,796 89,836 ------- ------- ------- Diluted earnings per share 0.20 0.07 0.26 ======= ======= ======= ACXIOM CORPORATION AND SUBSIDIARIES RESULTS BY SEGMENT (Unaudited) (Dollars in thousands) For the Three Months Ended June 30, June 30, March 31, Revenue: 2006 2005 2006 -------- -------- -------- US services & data 291,419 265,434 295,795 International services & data 45,286 44,837 48,548 -------- -------- -------- Total revenue 336,705 310,271 344,343 ======== ======== ======== US supplemental information: Services & data excluding IT mgmt 201,242 178,632 206,853 IT management services 90,177 86,802 88,942 -------- -------- -------- 291,419 265,434 295,795 ======== ======== ======== International supplemental information: Services & data excluding IT mgmt 45,286 44,837 48,548 ======== ======== ======== Income from operations: US services & data 35,950 14,717 40,794 International services & data 365 (1,380) 3,337 Corporate & other 0 1,637 456 -------- -------- -------- Total income from operations 36,315 14,974 44,587 ======== ======== ======== Margin: US services & data 12.3% 5.5% 13.8% International services & data 0.8% -3.1% 6.9% Total margin 10.8% 4.8% 12.9% ACXIOM CORPORATION AND SUBSIDIARIES DATA REVENUE AND COST OF DATA SUPPLEMENTAL SCHEDULE (Unaudited) (Dollars in thousands) For the Three Months Ended June 30, June 30, $ % 2006 2005 Variance Variance ------------------------------------------------ Data 54,530 53,218 1,312 2.5% Passthrough data 20,283 18,554 1,729 9.3% ---------- ----------- Total data revenue 74,813 71,772 3,041 4.2% ========== =========== Cost of data revenue: Data 29,289 30,331 (1,042) (3.4%) Passthrough data 20,283 18,554 1,729 9.3% ---------- ----------- Total cost of data 49,572 48,885 687 1.4% ========== =========== Margin: Data 46.3% 43.0% Passthrough data 0.0% 0.0% Total data 33.7% 31.9% For the Three Months Ended March 31, $ % 2006 Variance Variance ------------------------------------- Data 66,176 (11,646) (17.6%) Passthrough data 20,576 (293) (1.4%) ---------- Total data revenue 86,752 (11,939) (13.8%) ========== Cost of data revenue: Data 31,566 (2,277) (7.2%) Passthrough data 20,576 (293) (1.4%) ---------- Total cost of data 52,142 (2,570) (4.9%) ========== Margin: Data 52.3% Passthrough data 0.0% Total data 39.9% ACXIOM CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Dollars in thousands) June 30, March 31, $ % 2006 2006 Variance Variance Assets ---------- ---------- ----------------- ------ Current assets: Cash and cash equivalents 4,163 7,705 (3,542) (46.0%) Trade accounts receivable, net 264,933 261,624 3,309 1.3% Deferred income taxes 24,517 24,587 (70) (0.3%) Other current assets 45,204 44,937 267 0.6% ---------- ---------- Total current assets 338,817 338,853 (36) (0.0%) ---------- ---------- Property and equipment 685,515 662,948 22,567 3.4% Less - accumulated depreciation and amortization 353,633 329,177 24,456 7.4% ---------- ---------- Property and equipment, net 331,882 333,771 (1,889) (0.6%) ---------- ---------- Software, net of accumulated amortization 41,313 45,509 (4,196) (9.2%) Goodwill 477,291 472,401 4,890 1.0% Purchased software licenses, net of accumulated amortization 161,814 155,518 6,296 4.0% Unbilled and notes receivable, excluding current portions 17,188 19,139 (1,951) (10.2%) Deferred costs, net 116,651 112,817 3,834 3.4% Data acquisition costs 38,712 40,828 (2,116) (5.2%) Other assets, net 21,379 21,662 (283) (1.3%) ---------- ---------- 1,545,047 1,540,498 4,549 0.3% ========== ========== Liabilities and Stockholders' Equity ---------------------- Current liabilities: Current installments of long-term obligations 96,701 93,518 3,183 3.4% Trade accounts payable 41,905 44,144 (2,239) (5.1%) Accrued payroll and related expenses 27,487 32,139 (4,652) (14.5%) Other accrued expenses 79,345 81,428 (2,083) (2.6%) Deferred revenue 112,313 123,916 (11,603) (9.4%) Income taxes 9,759 4,845 4,914 101.4% Dividends payable 4,403 - 4,403 - ---------- ---------- Total current liabilities 371,913 379,990 (8,077) (2.1%) ---------- ---------- Long-term obligations: Long-term debt and capital leases, net of current installments 345,992 353,692 (7,700) (2.2%) Software and data licenses, net of current installments 28,854 22,723 6,131 27.0% ---------- ---------- Total long-term obligations 374,846 376,415 (1,569) (0.4%) ---------- ---------- Deferred income taxes 77,735 77,916 (181) (0.2%) Commitments and contingencies Stockholders' equity: Common stock 10,985 10,946 39 0.4% Additional paid-in capital 685,086 677,026 8,060 1.2% Unearned stock-based compensation (1,736) (1,941) 205 (10.6%) Retained earnings 423,683 410,278 13,405 3.3% Accumulated other comprehensive loss 8,637 2,205 6,432 291.7% Treasury stock, at cost (406,102) (392,337) (13,765) 3.5% ---------- ---------- Total stockholders' equity 720,553 706,177 14,376 2.0% ---------- ---------- 1,545,047 1,540,498 4,549 0.3% ========== ========== ACXIOM CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in thousands) For the Three Months Ended June 30, ------------------ 2006 2005 ------------------ Cash flows from operating activities: Net earnings 17,808 6,639 Non-cash operating activities: Depreciation and amortization 59,047 55,534 Loss (gain) on disposal or impairment of assets, net (84) 43 Deferred income taxes (233) 3,635 Non-cash stock compensation expense 553 298 Changes in operating assets and liabilities: Accounts receivable (1,796) 17,297 Other assets 3,186 (17,945) Accounts payable and other liabilities (9,743) 917 Deferrred revenue (12,388) (4,942) -------- -------- Net cash provided by operating activities 56,350 61,476 -------- -------- Cash flows from investing activities: Capitalized software (5,719) (5,673) Capital expenditures (217) (2,929) Cash collected from the sale and license of software 5,000 - Deferral of costs (16,887) (16,192) Payments received from investments 783 721 Net cash paid in acquisitions - (106,719) -------- -------- Net cash used by investing activities (17,040) (130,792) -------- -------- Cash flows from financing activities: Proceeds from debt 28,873 281,706 Payments of debt (67,866) (54,130) Dividends paid - (4,432) Sale of common stock 6,773 13,527 Acquisition of treasury stock (11,965) (160,354) Tax benefit of stock options exercised 1,079 - -------- -------- Net cash used by financing activities (43,106) 76,317 -------- -------- Effect of exchange rate changes on cash 254 (297) -------- -------- Net increase in cash and cash equivalents (3,542) 6,704 Cash and cash equivalents at beginning of period 7,705 4,185 -------- -------- Cash and cash equivalents at end of period 4,163 10,889 ======== ======== Supplemental cash flow information: Cash paid during the period for: Interest 7,830 4,397 Income taxes 5,268 190 Payments on capital leases and installment payment arrangements 18,905 19,929 Payments on software and data license liabilities 7,847 10,938 Other debt payments, excluding line of credit 1,711 1,357 Noncash investing and financing activities: Issuance of options for acquisition - 7,541 Software licenses and maintenance acquired under software obligation 15,266 2,161 Acquisition of property and equipment under capital lease and installment payment arrangements 19,426 26,458 Construction and other financing 5,904 3,654 ACXIOM CORPORATION AND SUBSIDIARIES FREE CASH FLOW DEFINITION -- There has been discussion over Acxiom's Free Cash Flow definition -- No single universally accepted definition of Free Cash Flow exists -- Acxiom's goal is to communicate Free Cash Flow available to equity vs. available for debt service -- Going forward calculation will continue to be transparent and consistent with an equity Free Cash Flow point of view ACXIOM CORPORATION AND SUBSIDIARIES CALCULATION OF FREE CASH FLOW AVAILABLE TO EQUITY (Q1 FY07 Comparison) AND RECONCILIATION TO OPERATING CASH FLOW (Unaudited) (Dollars in thousands) Old New Change ------------------ --------------- 06/30/06 06/30/06 $ % ------------------ --------------- Net cash provided by operating activities 56,350 56,350 - 0.0% Less: Tax benefit of stock options and warrants - - - - ------------------ --------------- Subtotal 56,350 56,350 - 0.0% Plus: Proceeds received from the disposition of operations - - - - Proceeds received from the disposition of assets - - - - Payments received from investments - 783 783 - Less: Capitalized software (5,719) (5,719) - 0.0% Capital expenditures (217) (217) - 0.0% Deferral of costs (16,887) (16,887) - 0.0% Payments on capital leases and installment payment arrangements - (18,905) (18,905) - Payments on software and data license liabilities - (7,847) (7,847) - Other required debt payments - (1,711) (1,711) - ------------------ --------------- Subtotal 33,527 5,847 (27,680) -82.6% Plus: Tax benefit of stock options and warrants 1,079 1,079 - 0.0% ------------------ --------------- Subtotal 34,606 6,926 (27,680) -80.0% Plus: Cash collected from sale of software 5,000 5,000 - 0.0% ------------------ --------------- Total 39,606 11,926 (27,680) -69.9% ================== =============== ACXIOM CORPORATION AND SUBSIDIARIES CALCULATION OF FREE CASH FLOW AVAILABLE TO EQUITY (FY06 Comparison) AND RECONCILIATION TO OPERATING CASH FLOW (Unaudited) (Dollars in thousands) Old New Change ---------------- ---------------- FY 2006 FY 2006 $ % ---------------- ---------------- Net cash provided by operating activities 275,833 275,833 - 0.0% Less: Tax benefit of stock options and warrants - (19,097) (19,097) - ---------------- ---------------- Subtotal 275,833 256,736 (19,097) -6.9% Plus: Proceeds received from the disposition of operations - 4,844 4,844 - Proceeds received from the disposition of assets 5,123 5,123 - 0.0% Payments received from investments - 3,760 3,760 - Less: Capitalized software (21,903)(21,903) - 0.0% Capital expenditures (6,848) (6,848) - 0.0% Deferral of costs (70,454)(70,454) - 0.0% Payments on capital leases and installment payment arrangements - (72,232) (72,232) - Payments on software and data license liabilities - (29,069) (29,069) - Other required debt payments - (9,302) (9,302) - ---------------- ---------------- Subtotal 181,751 60,655 (121,096) -66.6% Plus: Tax benefit of stock options and warrants - 19,097 19,097 - ---------------- ---------------- Subtotal 181,751 79,752 (101,999) -56.1% Plus: Cash collected from sale of software 20,000 20,000 - 0.0% ---------------- ---------------- Total 201,751 99,752 (101,999) -50.6% ================ ================ ACXIOM CORPORATION AND SUBSIDIARIES CALCULATION OF FREE CASH FLOW AVAILABLE TO EQUITY AND RECONCILIATION TO OPERATING CASH FLOW (Unaudited) (Dollars in thousands) -------------------------------------------- -------- 06/30/05 09/30/05 12/31/05 03/31/06 FY2006 06/30/06 -------------------------------------------- -------- Net cash provided by operating activities 61,476 44,785 95,414 74,158 275,833 56,350 Less: Tax benefit of stock options and warrants - - - (19,097)(19,097) - -------------------------------------------- -------- Subtotal 61,476 44,785 95,414 55,061 256,736 56,350 Plus: Proceeds received from the disposition of operations - 1,529 3,315 - 4,844 - Proceeds received from the disposition of assets - 3,613 1,510 - 5,123 - Payments received from investments 721 41 2,093 905 3,760 783 Less: Capitalized software (5,673) (5,809) (5,204) (5,217)(21,903) (5,719) Capital expenditures (2,929) (3,025) (401) (493) (6,848) (217) Deferral of costs (16,192) (18,703) (19,603) (15,956)(70,454) (16,887) Payments on capital leases and installment payment arrangements(19,929) (15,967) (17,994) (18,342)(72,232) (18,905) Payments on software and data license liabilities (10,938) (5,328) (7,344) (5,459)(29,069) (7,847) Other required debt payments (1,357) (2,434) (1,715) (3,796) (9,302) (1,711) -------------------------------------------- -------- Subtotal 5,179 (1,298) 50,071 6,703 60,655 5,847 Plus: Tax benefit of stock options and warrants - - - 19,097 19,097 1,079 -------------------------------------------- -------- Subtotal 5,179 (1,298) 50,071 25,800 79,752 6,926 Plus: Cash collected from sale of software - - 20,000 - 20,000 5,000 -------------------------------------------- -------- Total 5,179 (1,298) 70,071 25,800 99,752 11,926 ============================================ ======== ACXIOM CORPORATION AND SUBSIDIARIES CALCULATION OF FREE CASH FLOW (Old Format) (Unaudited) (Dollars in thousands) -------------------------------------------- -------- 06/30/05 09/30/05 12/31/05 03/31/06 FY2006 06/30/06 -------------------------------------------- -------- Net cash provided by operating activities 61,476 44,785 95,414 74,158 275,833 56,350 Less: Tax benefit of stock options and warrants - - - - - - -------------------------------------------- -------- Subtotal 61,476 44,785 95,414 74,158 275,833 56,350 Plus: Proceeds received from the disposition of operations - - - - - - Proceeds received from the disposition of assets - 3,613 1,510 - 5,123 - Payments received from investments - - - - - - Less: Capitalized software (5,673) (5,809) (5,204) (5,217)(21,903) (5,719) Capital expenditures (2,929) (3,025) (401) (493) (6,848) (217) Deferral of costs (16,192) (18,703) (19,603) (15,956)(70,454) (16,887) Payments on capital leases and installment payment arrangements - - - - - - Payments on software and data license liabilities - - - - - - Other required debt payments - - - - - - -------------------------------------------- -------- Subtotal 36,682 20,861 71,716 52,492 181,751 33,527 Plus: Tax benefit of stock options and warrants - - - - - 1,079 -------------------------------------------- -------- Subtotal 36,682 20,861 71,716 52,492 181,751 34,606 Plus: Cash collected from sale of software - - 20,000 - 20,000 5,000 -------------------------------------------- -------- Total 36,682 20,861 91,716 52,492 201,751 39,606 ============================================ ======== ACXIOM CORPORATION AND SUBSIDIARIES RECONCILIATION OF FREE CASH FLOW AS REPORTED (Unaudited) (Dollars in thousands) ------------------- FY 2005 FY 2006 ------------------- Free cash flow as previously reported 158,962 201,751 Plus: Proceeds received from the disposition of operations - 4,844 Payments received from investments 2,533 3,760 ------------------- Subtotal free cash flow available for debt service 161,495 210,355 Less: Required payments of debt 94,105 110,603 ------------------- Total free cash flow available to equity 67,390 99,752 =================== ACXIOM CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Dollars in thousands, except earnings per share) -------------------------------------------- --------- 06/30/05 09/30/05 12/31/05 03/31/06 FY2006 06/30/06 -------------------------------------------- --------- Revenue: Services 238,499 253,193 263,266 257,591 1,012,549 261,892 Data 71,772 77,330 84,165 86,752 320,019 74,813 -------------------------------------------- --------- Total revenue 310,271 330,523 347,431 344,343 1,332,568 336,705 Operating costs and expenses: Cost of revenue Services 194,349 191,883 189,502 196,428 772,162 196,073 Data 48,885 52,124 48,799 52,142 201,950 49,572 -------------------------------------------- --------- Total cost of revenue 243,234 244,007 238,301 248,570 974,112 245,645 Selling, general and administrative 53,700 54,902 57,625 51,642 217,869 54,745 Gains, losses and nonrecurring items, net (1,637) 12,799 (1,202) (456) 9,504 0 -------------------------------------------- --------- Total operating costs and expenses 295,297 311,708 294,724 299,756 1,201,485 300,390 Income from operations 14,974 18,815 52,707 44,587 131,083 36,315 % Margin 4.8% 5.7% 15.2% 12.9% 9.8% 10.8% Other income (expense) Interest expense (5,162) (7,416) (8,635) (7,531) (28,744) (7,769) Other, net 891 1,050 (71) 135 2,005 647 -------------------------------------------- --------- Total other income (expense) (4,271) (6,366) (8,706) (7,396) (26,739) (7,122) Earnings before income taxes 10,703 12,449 44,001 37,191 104,344 29,193 Income taxes 4,064 5,300 16,720 14,132 40,216 11,385 -------------------------------------------- --------- Net earnings 6,639 7,149 27,281 23,059 64,128 17,808 ============================================ ========= Diluted earnings (loss) per share 0.07 0.08 0.31 0.26 0.71 0.20 ============================================= ========= Q1 FY06 to Q1 Q4 FY06 to Q1 FY07 FY07 ---------------- ---------------- % $ % $ ---------------- ---------------- Revenue: Services 9.8% 23,393 1.7% 4,301 Data 4.2% 3,041 -13.8% (11,939) ---------------- ---------------- Total revenue 8.5% 26,434 -2.2% (7,638) Operating costs and expenses: Cost of revenue Services 0.9% 1,724 -0.2% (355) Data 1.4% 687 -4.9% (2,570) ---------------- ---------------- Total cost of revenue 1.0% 2,411 -1.2% (2,925) Selling, general and administrative 1.9% 1,045 6.0% 3,103 Gains, losses and nonrecurring items, net -100.0% 1,637 -100.0% 456 ---------------- ---------------- Total operating costs and expenses 1.7% 5,093 0.2% 634 Income from operations 142.5% 21,341 -18.6% (8,272) % Margin Other income (expense) Interest expense 50.5% (2,607) 3.2% (238) Other, net -27.4% (244) 379.3% 512 ---------------- ---------------- Total other income (expense) 66.8% (2,851) -3.7% 274 Earnings before income taxes 172.8% 18,490 -21.5% (7,998) Income taxes 180.1% 7,321 -19.4% (2,747) ---------------- ---------------- Net earnings 168.2% 11,169 -22.8% (5,251) ================ ================ Diluted earnings (loss) per share 185.7% 0.13 -23.1% (0.06) ================ ================ ACXIOM CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS - INTERNAL FORMAT (Unaudited) (Dollars in thousands, except earnings per share) ---------------------------------------------- 06/30/05 09/30/05 12/31/05 03/31/06 FY2006 ---------------------------------------------- Revenue 310,271 330,523 347,431 344,343 1,332,568 Operating costs and expenses: Salaries and benefits 126,264 127,325 129,888 132,579 516,056 Computer, communications and other equipment 77,647 76,250 73,614 71,730 299,241 Data costs 41,831 44,752 42,021 44,593 173,197 Other operating costs and expenses 51,192 50,582 50,403 51,310 203,487 Gains, losses and nonrecurring items, net (1,637) 12,799 (1,202) (456) 9,504 ---------------------------------------------- Total operating costs and expenses 295,297 311,708 294,724 299,756 1,201,485 ---------------------------------------------- Income (loss) from operations 14,974 18,815 52,707 44,587 131,083 ---------------------------------------------- Operating Margin 4.8% 5.7% 15.2% 12.9% 9.8% Other income (expense): Interest expense (5,162) (7,416) (8,635) (7,531) (28,744) Other, net 891 1,050 (71) 135 2,005 ---------------------------------------------- (4,271) (6,366) (8,706) (7,396) (26,739) ---------------------------------------------- Earnings (loss) before income taxes 10,703 12,449 44,001 37,191 104,344 ---------------------------------------------- Income taxes 4,064 5,300 16,720 14,132 40,216 ---------------------------------------------- Net earnings (loss) 6,639 7,149 27,281 23,059 64,128 ============================================== Diluted earnings (loss) per share 0.07 0.08 0.31 0.26 0.71 ============================================== FY07 FY07 --------- ---------------- -------------- 06/30/06 % $ % $ --------- ---------------- -------------- Revenue 336,705 8.5% 26,434 -2.2% (7,638) Operating costs and expenses: Salaries and benefits 135,917 7.6% 9,653 2.5% 3,338 Computer, communications and other equipment 73,119 -5.8% (4,528) 1.9% 1,389 Data costs 43,372 3.7% 1,541 -2.7% (1,221) Other operating costs and expenses 47,982 -6.3% (3,210) -6.5% (3,328) Gains, losses and nonrecurring items, net 0 -100.0% 1,637 -100.0% 456 --------- ---------------- -------------- Total operating costs and expenses 300,390 1.7% 5,093 0.2% 634 --------- ---------------- -------------- Income (loss) from operations 36,315 142.5% 21,341 -18.6% (8,272) --------- ---------------- -------------- Operating Margin 10.8% Other income (expense): Interest expense (7,769) 50.5% (2,607) 3.2% (238) Other, net 647 -27.4% (244) 379.3% 512 --------- ---------------- -------------- (7,122) 66.8% (2,851) -3.7% 274 --------- ---------------- -------------- Earnings (loss) before income taxes 29,193 172.8% 18,490 -21.5% (7,998) --------- ---------------- -------------- Income taxes 11,385 180.1% 7,321 -19.4% (2,747) --------- ---------------- -------------- Net earnings (loss) 17,808 168.3% 11,169 -22.8% (5,251) ========= ================ ============== Diluted earnings (loss) per share 0.20 185.7% 0.13 -23.1% (0.06) ========= ================ ============== ACXIOM CORPORATION AND SUBSIDIARIES MARGIN ANALYSIS (Unaudited) -------------------------------------------- 06/30/05 09/30/05 12/31/05 03/31/06 FY2006 -------------------------------------------- Gross profit 67,037 86,516 109,130 95,773 358,456 Gross margin 21.6% 26.2% 31.4% 27.8% 26.9% Operating margin 4.8% 5.7% 15.2% 12.9% 9.8% Services gross profit 44,150 61,310 73,764 61,163 240,387 Services gross margin 18.5% 24.2% 28.0% 23.7% 23.7% Data gross profit 22,887 25,206 35,366 34,610 118,069 Data gross margin 31.9% 32.6% 42.0% 39.9% 36.9% Q1 FY06 to Q4 FY06 to Q1 FY07 Q1 FY07 --------- --------------- ----------------- 06/30/06 % $ % $ --------- --------------- ----------------- Gross profit 91,060 35.8% 24,023 -4.9% (4,713) Gross margin 27.0% Operating margin 10.8% Services gross profit 65,819 49.1% 21,669 7.6% 4,656 Services gross margin 25.1% Data gross profit 25,241 10.3% 2,354 -27.1% (9,369) Data gross margin 33.7% ACXIOM CORPORATION AND SUBSIDIARIES EXPENSE TREND ANALYSIS (Unaudited) ------------------------------------------ --------- 06/30/05 09/30/05 12/31/05 03/31/06 FY2006 06/30/06 ------------------------------------------ --------- Salaries and benefits % of revenue 40.7% 38.5% 37.4% 38.5% 38.7% 40.4% Computer, communications and other equipment % of revenue 25.0% 23.1% 21.2% 20.8% 22.5% 21.7% Data costs % of revenue 13.5% 13.5% 12.1% 13.0% 13.0% 12.9% Other operating costs and expenses % of revenue 16.5% 15.3% 14.5% 14.9% 15.3% 14.3% Total operating costs and expenses % of revenue 95.2% 94.3% 84.8% 87.1% 90.2% 89.2% SG&A % of revenue 17.3% 16.6% 16.6% 15.0% 16.3% 16.3% ACXIOM CORPORATION Financial Road Map(1) --------------------- (as of June 30, 2006) ------------------ ------------------ Actual Actual Years Ending March 31, Fiscal 2006 Q1 Fiscal 2007 ------------------ ------------------ U.S. Revenue Growth 13.6% 9.8% U.S. Revenue $1,148 million $291 million International Revenue Growth -13.0% 1.0% International Revenue $185 million $45 million U.S. Operating Margin 11.6% 12.3% Adjusted U.S. Operating Margin 12.4%(3) International Operating Margin -1.1% 0.8% Adjusted International Operating Margin 2.5%(3) Return on Assets(2) 8.5% 9.8% Adjusted Return on Assets(2) 9.5%(3) 10.8%(3) Return on Invested Capital(2) 11.4%(3) 12.8%(3) Operating Cash Flow $276 million $56 million Free Cash Flow to $100 million $12 million Equity Revolving Credit Line $252 million $242 million Balance Dividends Per Share $0.20 $0.05 ------------------- ----------------- Target Long-Term Goals Years Ending March 31, Fiscal 2007 Fiscal 2010 ------------------- ----------------- U.S. Revenue Growth 7% to 10% 8% to 11% (CAGR) U.S. Revenue $1,230 to $1,260 mil - International Revenue Growth 0% to 5% 5% to 8% (CAGR) International Revenue $180 to $190 mil - U.S. Operating Margin 14% to 15% 16% to 18% Adjusted U.S. Operating Margin International Operating Margin 2% to 4% 12% to 15% Adjusted International Operating Margin Return on Assets(2) 11% to 13% 14% to 17% Adjusted Return on Assets(2) Return on Invested Capital(2) 13% to 15% 16% to 19% Operating Cash Flow $280 to $300 mil $320 to $360 mil Free Cash Flow to $113 to $133 mil $140 to $160 mil Equity Revolving Credit Line less than $500 mil less than $500 mil Balance Dividends Per Share $0.22 $0.24 to $0.28 ------------------- (1) Assumptions and definitions are defined on the following schedule: "Financial Road Map assumptions and definitions" (2) ROA and ROIC are calculated on a trailing 4 quarters basis. (3) Results exclude unusual charges of $9.1 million for U.S. and $6.7 million for International in the quarter ended September 30, 2005. These charges are excluded when calculating performance compared to the Road Map since they were not considered in setting the Road Map target. All other time periods are as reported for GAAP. ACXIOM CORPORATION Financial Road Map Assumptions and Definitions ---------------------------------------------- Assumptions ----------- 1. The effective tax rate is projected to be 38-39% for future years. 2. Interest rates are assumed to increase slightly over the current levels. 3. Excluding acquired credits, the Company expects to utilize all of its federal credits and begin paying regular tax in fiscal 2007. The Company expects to gradually begin paying state taxes as state NOLs are utilized. 4. The Company will pay incentives under its bonus plan of $15 to $25 million for each of the years beginning in fiscal 2007 based on achievement of the Company's business plan. 5. The Company will maintain a relatively constant mix of business for each of its three business segments. 6. Foreign exchange rates will remain at approximately the current levels. 7. Stock repurchases will be in amounts that yield the highest shareholder return considering all other uses for the available cash. 8. Diluted outstanding shares will increase slightly to reflect the impact of in-the-money options as the stock price increases. 9. Long-term goals are based on the Company's current assessment of opportunities and are subject to change. There are risks associated with obtaining these goals which are explained under forward looking statements in the press release accompanying this Financial Road Map. Acxiom disclaims any obligation to update the information contained in this Financial Road Map. Definitions ----------- 1. Revenue Growth is defined as the percentage growth compared to the previous corresponding fiscal year or comparable period. 2. Operating Margin is defined as the income from operations as a percentage of revenue. 3. Return on Assets (ROA) is defined as income from operations divided by average total assets for the trailing four quarters. 4. Return on Invested Capital (ROIC) is defined as income from operations adjusted for the implied interest expense included in operating leases divided by the trailing four quarters' average invested capital. The implied interest adjustment for operating leases is calculated by multiplying the average quarterly balances of the present value of operating leases ((beginning balance + ending balance)/2) x an 8% implied interest rate on the leases. Average invested capital is defined as the trailing four-quarter average of the ending quarterly balances for total assets less operating cash, less non-interest bearing liabilities, plus the present value of operating leases. 5. Operating Cash Flow is as shown on the Company's cash flow statement. 6. Free Cash Flow to Equity is defined as cash flow from operating activities plus or minus cash flow from investing activities (excluding net cash paid for acquisitions), less required payments of debt (total debt payments excluding payments on the line of credit). 7. Revolving Credit Line Balance is defined as actual funds borrowed under the Company's revolving line of credit facility at the end of the period. 8. Dividends Per Share is defined as the sum of the dividends for that period. Reconciliation of Non-GAAP Measurements --------------------------------------- (Dollars in thousands) ----------------- ----------------- Actual Actual Years Ending March 31, Fiscal 2006 Q1 Fiscal 2007 ----------------- ----------------- U.S. Operating Margin --------------------- U.S. Revenue 1,147,641 291,419 U.S. Operating Income 133,072 35,950 U.S. Operating Income Margin 11.6% 12.3% Gains, losses and nonrecurring items, net 6,147 0 ValueAct Defense 2,216 0 Lawsuit Expenses 761 0 -------------- -------------- Adjusted U.S. Operating Income(1) 142,196 35,950 Adjusted U.S. Operating Income Margin(1) 12.4% 12.3% ============== ============== International Operating Margin ------------------------------ International Revenue 184,927 45,286 International Operating Income (1,991) 365 International Operating Income Margin -1.1% 0.8% Gains, losses and nonrecurring items, net 6,652 0 -------------- -------------- Adjusted International Operating Income(1) 4,661 365 Adjusted International Operating Income Margin(1) 2.5% 0.8% ============== ============== ---------------------------------------------------------------------- Free Cash Flow to Equity ------------------------ Net cash provided by operating activities 275,833 56,350 Plus: Proceeds received from disposition of assets 5,123 0 Proceeds received from disposition of operations 4,844 0 Cash received from investments 3,760 783 Tax benefit of stock option and warrant exercise 0 1,079 Proceeds received from sale of software 20,000 5,000 -------------- -------------- 33,727 6,862 Less: Capitalized software (21,903) (5,719) Capital expenditures (6,848) (217) Deferral of costs (70,454) (16,887) Capital lease and installment payments (72,232) (18,905) Software and data license liability payments (29,069) (7,847) Other debt payments (9,302) (1,711) -------------- -------------- (209,808) (51,286) -------------- -------------- Free cash flow to equity 99,752 11,926 ============== ============== ---------------------- -------------------- Target Long-Term Goals Fiscal 2007 Fiscal 2010 ---------------------- -------------------- Free Cash Flow to Equity Low High Low High ------------------------ ---------------------- -------------------- Net cash provided by operating activities 280,000 300,000 320,000 360,000 Plus: Proceeds received from disposition of assets 0 0 0 0 Proceeds received from disposition of operations 0 0 0 0 Cash received from investments 1,000 1,000 0 0 Tax benefit of stock option and warrant exercise 7,000 7,000 10,000 10,000 Proceeds received from sale of software 10,000 10,000 0 0 --------- ----------- --------- --------- 18,000 18,000 10,000 10,000 Less: Capitalized software (20,000) (20,000) (20,000) (25,000) Capital expenditures (7,000) (7,000) (10,000) (10,000) Deferral of costs (60,000) (60,000) (65,000) (75,000) Capital lease and installment payments (60,000) (60,000) (65,000) (70,000) Software and data license liability payments (28,000) (28,000) (25,000) (25,000) Other debt payments (10,000) (10,000) (5,000) (5,000) --------- ----------- --------- --------- (185,000) (185,000) (190,000) (210,000) --------- ----------- --------- --------- Free cash flow to equity 113,000 to 133,000 140,000 to 160,000 ========= =========== ========= ========= Free cash flow to equity as defined by the Company may not be comparable to similarly titled measures reported by other companies. Management of the Company has included free cash flow to equity in this Financial Road Map representing the amount of money available for the Company's discretionary spending. Management believes that it provides investors with a useful alternative measure of liquidity by allowing an assessment of the amount of cash available for general corporate and strategic purposes after funding operating activities and capital expenditures, capitalized software expenses, deferred costs and required debt repayments. The above table reconciles free cash flow to equity to cash provided by operating activities, the nearest comparable GAAP measure. Notes ----- (1) Results exclude unusual charges of $9.1 million for U.S. and $6.7 million for International in the quarter ended September 30, 2005. These charges are excluded when calculating performance compared to the Road Map since they were not considered in setting the Road Map target. All other time periods are as reported for GAAP. Reconciliation of Non-GAAP Measurements --------------------------------------- (Dollars in thousands) -------------------------------- Actual Fiscal 2006 -------------------------------- Return on Assets (ROA) and Return on Invested Adjusted Capital (ROIC)(5) ROA ROA ROIC ------------------ -------------------------------- Numerator: Income from operations 131,083 131,083 131,083 Unusual Charges, Net(6) 15,776 15,776 Add implied interest on operating leases(1) 11,696 -------------------------------- 131,083 146,859 158,554 -------------------------------- Denominator: Average total assets(2) 1,549,933 1,549,933 1,549,933 Less average cash(3) (8,616) Less average non-interest bearing current liabilities(4) (288,063) Plus average present value of operating leases(1) 135,190 -------------------------------- 1,549,933 1,549,933 1,388,444 -------------------------------- Return on invested capital 8.5% 9.5% 11.4% ================================ -------------------------------- Actual Q1 Fiscal 2007 -------------------------------- Return on Assets (ROA) and Return on Invested Adjusted Capital (ROIC)(5) ROA ROA ROIC ------------------ -------------------------------- Numerator: Income from operations 152,424 152,424 152,424 Unusual Charges, Net(6) 15,776 15,776 Add implied interest on operating leases(1) 10,674 -------------------------------- 152,424 168,200 178,874 -------------------------------- Denominator: Average total assets(2) 1,554,756 1,554,756 1,554,756 Less average cash(3) (6,934) Less average non-interest bearing current liabilities(4) (285,462) Plus average present value of operating leases(1) 132,750 -------------------------------- 1,554,756 1,554,756 1,395,110 -------------------------------- Return on invested capital 9.8% 10.8% 12.8% ================================ -------------------------------------------- Target Fiscal 2007 -------------------------------------------- Return on Assets (ROA) ROA ROIC and Return on Invested -------------------------------------------- Capital (ROIC)(5) Low High Low High ------------------ -------------------------------------------- Numerator: Income from operations 175,500 196,900 175,500 196,900 Unusual Charges, Net(6) Add implied interest on operating leases(1) 11,000 11,000 -------------------------------------------- 175,500 196,900 186,500 207,900 -------------------------------------------- Denominator: Average total assets(2) 1,550,000 1,575,000 1,550,000 1,550,000 Less average cash(3) (10,000) (10,000) Less average non-interest bearing current liabilities(4) (277,000) (288,000) Plus average present value of operating leases(1) 133,000 133,000 -------------------------------------------- 1,550,000 1,575,000 1,396,000 1,385,000 -------------------------------------------- Return on invested capital 11% to 13% 13% to 15% ============================================ -------------------------------------------- Long-Term Goals Fiscal 2010 -------------------------------------------- Return on Assets (ROA) ROA ROIC and Return on Invested -------------------------------------------- Capital (ROIC)(5) Low High Low High ------------------ -------------------------------------------- Numerator: Income from operations 268,600 337,600 268,600 337,600 Unusual Charges, Net(6) Add implied interest on operating leases(1) 9,000 9,000 -------------------------------------------- 268,600 337,600 277,600 346,600 -------------------------------------------- Denominator: Average total assets(2) 1,860,000 1,960,000 1,860,000 1,960,000 Less average cash(3) (10,000) (10,000) Less average non-interest bearing current liabilities(4) (261,000) (285,000) Plus average present value of operating leases(1) 114,000 114,000 -------------------------------------------- 1,860,000 1,960,000 1,703,000 1,779,000 -------------------------------------------- Return on invested capital 14% to 17% 16% to 19% ============================================ Notes ----- (1) Average present value of operating leases is the average for the trailing 4 quarter ends of the present value of future payments on operating leases, discounted at 8% which is the assumed implicit interest rate included in the leases. The implied interest added to the numerator is the 8% assumed interest charge on the average quarterly balance ((beginning + Ending) / 2) of the present value of the leases. (2) Average total assets is the average of the GAAP amount for the trailing 4 quarter ends. (3) Average cash is the average of the GAAP amount for the trailing 4 quarter ends. Future cash balances above $10.0 million are assumed to be invested at money market rates and are excluded from this operating cash adjustment. (4) Average non-interest bearing current liabilities is the average for the trailing 4 quarter ends of all current liabilities excluding the current portion of long-term debt. (5) ROA and ROIC figures are calculated on a trailing 4 quarters basis. (6) Results exclude unusual charges of $9.1 million for U.S. and $6.7 million for International in the quarter ended September 30, 2005. These charges are excluded when calculating performance compared to the Road Map since they were not considered in setting the Road Map target. All other time periods are as reported for GAAP. Return on Invested Capital (ROIC) as defined by the Company, may not be comparable to similarly titled measures reported by other companies. Management of the Company has included ROIC in this Financial Road Map because it measures the capital efficiency of our business. ROIC does not consider whether the business is financed with debt or equity; rather ROIC calculates a return on all capital invested in the business. The above table reconciles ROIC to a ROA calculation using GAAP numbers. The Company uses ROIC in a number of ways, including pricing analysis, capital expenditure evaluation, and merger and acquisition valuation. *T