Back to GetFilings.com
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
x |
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Fiscal Year Ended March 31, 2002
OR
¨ |
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Transition Period from to
Commission
File Number: 1-11008
CATALINA MARKETING
CORPORATION
(Exact Name of Registrant as Specified in its Charter)
| Delaware |
|
33-0499007 |
| (State or Other Jurisdiction of |
|
(I.R.S. Employer |
| Incorporation or Organization) |
|
Identification Number) |
| |
|
|
| 200 Carillon Parkway, St. Petersburg, Florida |
|
33716-2325 |
| (Address of Principal Executive Offices) |
|
(Zip Code) |
(727) 579-5000
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class
|
|
Name of each exchange on which registered
|
| |
|
|
| Common Stock, $0.01 Par Value |
|
New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s
knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨
The aggregate market value of the voting stock held by
non-affiliates of the Registrant, based on the closing price of such stock as of April 22, 2002 ($35.00), as reported by the New York Stock Exchange, Inc., was $1,712,333,875. The number of shares of Registrant’s common stock, par value $0.01
per share, outstanding as of April 22, 2002, was 55,401,526.
Documents Incorporated by Reference
Certain portions of Registrant’s Definitive Proxy Statement for 2002 are incorporated by reference in Part III of this report.
FORM 10-K
| |
|
|
|
Page No.
|
| |
|
PART I |
|
|
| Item 1. |
|
|
|
1 |
| Item 2. |
|
|
|
5 |
| Item 3. |
|
|
|
5 |
| Item 4. |
|
|
|
5 |
| |
| |
| |
|
PART II |
|
|
| |
| Item 5. |
|
|
|
5 |
| Item 6. |
|
|
|
6 |
| Item 7. |
|
|
|
7 |
| Item 7A. |
|
|
|
14 |
| Item 8. |
|
|
|
15 |
| Item 9. |
|
|
|
34 |
| |
| |
| |
|
PART III |
|
|
| |
| Item 10. |
|
|
|
34 |
| Item 11. |
|
|
|
34 |
| Item 12. |
|
|
|
34 |
| Item 13. |
|
|
|
34 |
| |
| |
| |
|
PART IV |
|
|
| |
| Item 14. |
|
|
|
35 |
PART I
General
Catalina Marketing Corporation, a Delaware corporation, (“Catalina Marketing” or the “Company”) provides a wide range of strategic, targeted marketing
solutions for consumer goods companies, pharmaceutical manufacturers, and their respective retailers. The targeted marketing services of the Company are provided by interrelated operating groups that strive to influence the purchasing behavior of
consumers wherever and whenever they make purchasing decisions. Through their operating groups, Catalina Marketing is able to reach consumers internationally and domestically—in-store, using incentives, loyalty programs, sampling and
advertising messages; at-home, through direct mailings and online. As of March 31, 2002, the Company employed 1,597 people reporting into 32 offices throughout the United States, Europe and Asia.
Services
Catalina Marketing was founded in 1983
to provide consumers with in–store targeted coupons. Employing data mining technology from the Company’s in-store Network (the “Catalina Marketing Network®”), Catalina Marketing now offers in-store, online and at-home reach in providing its strategic marketing solutions. These solutions are
purchase-based, individually customized communications and promotions for manufacturers and retailers that increase sales through incentives, loyalty programs, sampling and advertising messages. The Company’s services enable retailers and
manufacturers to impact purchase decisions before, during and after the purchase using a variety of strategic, targeted programs.
The primary service line of the Catalina Marketing Network is the in–store delivery of incentives at the checkout lane. Catalina Marketing links its proprietary software, computers, central databases and specially designed
thermal printers with a retailer’s point-of-sale controllers and scanners. The system prints customized promotion certificates at the point of sale based on product Universal Product Codes (“UPC”) or other scanned information. The
printed promotions are handed to consumers by the cashier at the end of the shopping transaction. Catalina Marketing contracts with manufacturers and retailers to print promotions and receives a fee for each promotion printed.
Catalina Marketing enters into agreements with retail chains to install the Catalina Marketing Network in all or selected
stores within the chain, either regionally or nationally. Upon installation, the retailer pays a one-time fee for each installation and generally agrees to use the Catalina Marketing Network in its store for a minimum of five years. Catalina
Marketing pays distribution fees to, and exchanges services with the retailer based on the number of manufacturer promotions printed.
The equipment installed in each retail store consists of a thermal printer at each checkout lane linked by a personal computer on premises to the retailer’s point-of-sale controller and scanning equipment. Catalina
Marketing operates two data processing facilities in the United States that communicate via modem with the personal computers installed in the stores to send promotional instructions and retrieve performance data. All of the equipment and supplies,
including computers, printers and paper, used in a retail installation are purchased through outside sources. While there are currently a few primary suppliers, Catalina Marketing believes that alternate sources of supply are available without
material interruptions of the Company’s business.
The services of the Catalina Marketing Network are driven
by proprietary software. The software design is flexible and upgradable, supporting new applications that are developed and implemented on a continuous basis. This flexibility allows the network to offer new services, expand, and evolve as industry
or customer requirements change.
Catalina Marketing offers its core programs and services through the Catalina
Marketing Network, which is operated primarily in supermarkets. These targeted marketing solutions, including discount coupons, loyalty
1
marketing programs, sampling, advertising, in-store instant-win games and other incentives, are delivered directly to shoppers based on their actual purchase behavior. By specifying which
purchases will “trigger” a promotion to print, manufacturers and retailers can deliver customized incentives and messages to only the consumers they wish to reach. Catalina Marketing’s integrated program of applications is designed to
reach shoppers before, during and after the purchase. Couponing programs, such as Checkout Coupon®
and Checkout Direct®, use patented UPC-based scanner technology to target consumers and distribute
coupons at checkout based on actual purchase behavior. Personally identifiable data that may be collected from the Company’s targeted marketing programs, as well as its research programs, is not sold or given to any outside party without the
express permission of the consumer.
Each program is designed to meet specific objectives of consumer packaged
goods manufacturers and supermarket retailers. Loyalty programs allow manufacturers and retailers to target specific households based on over 52 weeks of past purchase data. For retailers, loyalty programs include frequent shopper card
production and data management. Sampling programs target consumers based on either current purchase behavior or through a household-level database and deliver samples upon request. Samples can be full or trial-sized and delivered in-store or
at home. Advertising programs allow manufacturers to reach a captive audience through a toll-free number, announcement or message delivered at the checkout stand. In-store instant-win games are tied-in with the retailer by offering a
chance to win instantly at the checkout stand based on products that are purchased.
Catalina Marketing offers 13
four-week cycles of availability on the Catalina Marketing Network each year for more than 650 product categories, such as coffee, baby food and frozen entrees. Exclusive rights to product categories are generally given to the purchasers of specific
cycle or cycles in particular product categories, and for national programs, a right of first acceptance to purchase the same cycles in the subsequent year is given to the manufacturer who purchased the earlier cycles.
The primary revenue source of the Catalina Marketing Network is a function of total promotions printed based on a per promotion charge,
with a minimum category fee for manufacturers based on shopper reach of the network and category unit volume. Redemption processing of these promotions is similar to that of traditional manufacturer coupons. Retailers provide discounts to consumers
who present the coupons, send redeemed coupons to clearinghouses, and receive reimbursements for the discounts provided and handling fees from the manufacturers.
Retail loyalty marketing services offer targeted direct mail marketing services through Market Logic, Inc. (“Market Logic”) and loyalty card production services through the
Company’s facilities based in Manasquan, New Jersey (formerly Dynamic Controls, Inc. or DCI). Retail loyalty marketing services also provides data collection services, data storage services, data mining services and report processing services
through the Company’s facilities based in St. Petersburg, Florida and Manasquan, New Jersey.
Catalina
Marketing’s core domestic product lines, described above, contributed approximately 70 percent of the Company’s revenues in fiscal 2002, 74 percent in fiscal 2001, and 74 percent in fiscal 2000. In the United States as of March 31, 2002,
the Catalina Marketing Network was installed in 16,488 retail stores reaching more than 204 million shoppers weekly.
The international operations of Catalina Marketing provide in–store electronic targeted marketing services for consumers in Europe and Asia. The Company’s current presence in Europe is in the United Kingdom, France,
and Italy. In Asia, the Company currently operates in Japan. As of March 31, 2002, the Company had installed its network in 2,897 supermarket and hypermarket retailers in Europe, and its weekly shopper reach was approximately 24.7 million. In Asia,
where the Company provides outdoor media services, in addition to in-store electronic targeted marketing services, the Catalina Marketing Network has a weekly shopper reach now totaling nearly 11.0 million in 484 retail outlets as of March 31, 2002.
Segment and geographic information regarding international revenues and long-lived assets is presented in Note 10.
2
Health Resource Publishing (“HRP”) uses an in-store prescription-based
targeting technology to provide direct-to-consumer and targeted information services advertising to healthcare consumers at the pharmacy level through the Health Resource Network. The Health Resource® newsletter is triggered by the National Drug Code (“NDC”), found on all prescription drugs and targeted to the consumer based on the
NDC, age, gender, third party payer, or first script / refill. When a prescription is processed via the Health Resource Network, this customized newsletter with prescription information, therapeutically relevant editorial and product advertising
material is laser-printed in the pharmacy and given to consumers by their Pharmacist when they get their medication.
HRP provides patients with targeted information to help them make better decisions about their healthcare through a variety of health-related educational tools designed to engage and educate patients regarding their prescription
medication. Compliance DirectSM improves prescription medication compliance
and persistence. Sent to patients from their own pharmacies, Compliance Direct letters contain compliance messages, such as welcoming the patient to therapy or refill reminders, sponsored by the manufacturer. PharmAwareSM delivers customized messages for pharmaceutical manufacturers needing to get their educational
messages directly to the pharmacist and pharmacy staff via the in-store Health Resource printer. The Brand Awareness CounterMat places brand specific messages directly on the pharmacy counter, ensuring customers dropping off/picking up
prescriptions see the advertisement.
HRP offers availability on the Health Resource Network to clients for
product triggers based on all prescription medications, which are distinguished by an NDC symbol. Clients are able to use these triggers to promote a wide variety of products such as over the counter medicines, prescription medication, and other
healthcare remedies and merchandise. Exclusivity rights for a particular trigger are only given to those clients that contract for periods of one year or more. Right of first acceptance to purchase the same exclusivity in the subsequent year is
given to those customers who are granted trigger exclusivity.
The primary revenue source of the Health Resource
Network is a function of total promotions printed based on a per promotion charge, with a minimum category fee for customers based on shopper reach of the network and trigger unit volume.
On June 1, 2000, the Company acquired HealthCare Data Corporation (“HDC”), a company likewise engaged in prescription based targeted marketing to pharmacy
customers. The acquisition of HDC, together with the organic growth of the Health Resource Network, enabled HRP to expand its networks to 17,716 pharmacy outlets reaching more than 16 million households weekly as of March 31, 2002. The business
operations of HDC have been integrated with HRP, the combination of which are referred to herein as “HRP.”
Developing product lines include the services provided by Catalina Interactive Marketing Services (“CIMS”) and Alliance Research (“ARI”). CIMS, previously Supermarkets Online, provides the
industry’s leading online secure coupon format through its ValuPageSM service at www.valupage.com.
The ValuPage service makes use of a bar code that, when printed at home and presented at the checkout lane of one of the 14,049 participating supermarkets, along with the promoted items, issues redeemable coupons, or “Web Bucks”, from
in-store printers, which are cash rewards that consumers use to save on their next visit to the store. CIMS also offers a ValuPage e-mail service that delivers ValuPage coupons and other consumer packaged goods promotions directly to a
shopper’s e-mail in-box.
ARI, acquired in July 1999, provides research products on consumer attitudes. ARI
has developed a suite of proprietary techniques for attitudinal research through the application of emerging technologies. These technologies include Interactive Voice Response, which allows consumers to respond to surveys via automated telephone
services, and VOCALS®, which digitally records actual voice responses in telephone surveys.
ARI’s newest product line, GuestTrax, surveys customer satisfaction in the restaurant, retail and entertainment industries. On September 1, 2000, the Company acquired Market Intelligence, Inc. (“MI”), an attitudinal research company,
to supplement its internal growth plans and strategies. The business operations of MI have been integrated with ARI, the combination of which are referred to herein as “Research.”
3
Sales and Marketing
The Company has a manufacturer sales force and a retail sales and marketing force, both working on providing the Company’s targeted marketing services to its customers. The combined manufacturer and retail sale
forces provide a coordinated sales approach to each client in order to offer tailored targeted marketing solutions.
Manufacturer Sales Force. The primary focus of the Company’s marketing effort is to attract national consumer packaged goods and prescription medication manufacturers to purchase category cycles. The sales and client
service force of Catalina Marketing focus on current and prospective customers, and work with them on a consultative basis to develop and implement customized, targeted marketing programs that fit each brand’s strategies and objectives.
Retail Sales and Marketing Force. Catalina Marketing has two goals for its retail sales and
marketing force. The first is to continue expansion of its distribution channel by installing stores and pharmacies in major markets that are not currently part of the Catalina Marketing Network or the Health Resource Network. Expansion of HRP is
achieved through the addition of new major pharmacy chains. The second is to encourage currently installed retailers to use the Company’s full-service retail loyalty marketing services, as well as Network-generated incentives to promote private
label brands or high-margin departments.
Research and Development
The Company’s expenditures for research and development are generally for market research, software development, system upgrades and pilot-project execution to create, test and
support new applications for the Catalina Marketing and Health Resource Networks. Catalina Marketing believes that new service and application development, along with market expansion, are vital to maintain its continued growth.
Competition
Competition in the
marketing services business is intense and includes many competitors. Catalina Marketing competes for manufacturers’ advertising and consumer promotion budgets with a wide range of media, including television, radio, print and direct mail
advertising, as well as several alternative in-store and point-of-sale programs. Within the coupon industry, the Company competes with various traditional coupon delivery methods that are less expensive per delivered coupon, including free-standing
inserts (“FSI”), newspapers, direct mail, magazines and in- or on-product packaging, as well as other “in-store” marketing companies that use a variety of coupon, promotion or advertising delivery methods. HRP’s competition
includes a variety of direct to consumer advertisers for healthcare products. Catalina Marketing competes for advertising and promotional dollars based on the efficiency of the Catalina Marketing Networks, its ability to accurately and effectively
target potential customers, the number of shoppers reached, and the ability to influence consumer buying behavior.
Employees
Catalina Marketing employed 1,597 people as of March 31, 2002, approximately 1,295 of which were full-time. No employees are covered by a
collective bargaining arrangement. More than 1,400 of the Company’s employees are employed in the United States, with approximately 27 percent of the United States employees based in the St. Petersburg, Florida headquarters.
Patents, Proprietary Information and Trademarks
Catalina Marketing currently holds 155 United States and foreign patents relating to Catalina Marketing products and services and has a variety of patent applications pending. These patents include the initial
targeted incentive core patents as well as improvements and additional inventions related to Catalina Marketing’s current products and services and provide a competitive advantage; accordingly the Company will vigorously defend its proprietary
rights in all appropriate circumstances. Patent protection for evolving and new products and services
4
is important in maintaining Catalina Marketing’s leading position in the marketing and promotion industry, and will be a major factor affecting its future performance along with its ability
to market its services to retailers and manufacturers.
Catalina Marketing also believes that product recognition
is an important competitive factor in the electronic marketing and promotion industry. Accordingly, the Company promotes its service marks and trademarks in connection with its product and marketing activities. It also regards certain computer
software in the Catalina Marketing Network and each additional service application as proprietary and protects such software, as appropriate through copyrights, trade secret laws, non-disclosure agreements and internal security measures. While such
methods may not afford complete protection, as there can be no absolute assurance that others will not independently develop such know-how, concepts, or ideas, Catalina Marketing believes these methods offer significant protection for its
proprietary software.
The Company moved into its current headquarters facility in
November, 2000 in St. Petersburg, Fl. This 142,857 square foot facility houses the Company’s principal administrative, marketing, information technology and product development offices. The Company leases an additional 27 sales and support
offices across the United States, consisting of approximately 375,000 square feet in the aggregate, and four offices for its foreign operations. The Company believes that the new headquarters facility along with the existing sales and support
offices are adequate to meet current requirements and that suitable additional space will be available as needed to accommodate growth of its operations and additional sales and support offices for the foreseeable future.
Item 3.
Legal Proceedings
Not applicable.
Item 4.
Submission of Matters to a Vote of Security Holders
Not applicable.
PART II
Item 5. Market for Registrant’s Common Stock and Related Stockholder Matters
A. |
|
Market Prices of Stock |
The Company’s common stock, par value $0.01 per share (“Common Stock”), is traded on the New York Stock Exchange (“NYSE”) under the symbol “POS.” The following table sets forth the high and
low closing prices as reported by the NYSE for the Common Stock for the quarters ended as follows:
| |
|
High
|
|
Low
|
| Fiscal 2002: |
|
|
|
|
|
|
| March 31, 2002 |
|
$ |
39.01 |
|
$ |
34.74 |
| December 31, 2001 |
|
|
34.78 |
|
|
26.40 |
| September 30, 2001 |
|
|
34.52 |
|
|
26.99 |
| June 30, 2001 |
|
|
37.59 |
|
|
28.40 |
| |
| Fiscal 2001: |
|
|
|
|
|
|
| March 31, 2001 |
|
$ |
36.31 |
|
$ |
29.81 |
| December 31, 2000 |
|
|
40.00 |
|
|
35.19 |
| September 30, 2000 |
|
|
44.00 |
|
|
33.88 |
| June 30, 2000 |
|
|
36.10 |
|
|
29.50 |
Stock prices reflect the effect of the 3-for-1 stock split in Fiscal
2001.
As of March 31, 2002, there were approximately 918 registered holders of shares of Common Stock.
5
The Company has not paid any cash dividends to date, and there are no current plans to pay a cash dividend in the future.
SELECTED
CONSOLIDATED FINANCIAL DATA
The selected Income Statement Data and Balance Sheet Data set forth below are
derived from the audited Consolidated Financial Statements of the Company and the related notes thereto. The information set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” and the Consolidated Financial Statements and Notes to the Consolidated Financial Statements included elsewhere in this Annual Report.
| |
|
Fiscal Year Ended March 31,
|
|
| |
|
2002
|
|
|
2001
|
|
|
2000
|
|
|
1999
|
|
|
1998
|
|
| |
|
(Dollars in thousands, except per share amounts) |
|
| Income Statement Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Revenues |
|
$ |
446,668 |
|
|
$ |
417,881 |
|
|
$ |
350,922 |
|
|
$ |
264,783 |
|
|
$ |
217,150 |
|
| Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Direct operating expenses |
|
|
193,121 |
|
|
|
174,237 |
|
|
|
142,229 |
|
|
|
110,167 |
|
|
|
84,191 |
|
| Selling, general and administrative |
|
|
111,492 |
|
|
|
106,382 |
|
|
|
88,247 |
|
|
|
59,363 |
|
|
|
56,364 |
|
| Depreciation and amortization |
|
|
42,032 |
|
|
|
43,243 |
|
|
|
35,175 |
|
|
|
27,342 |
|
|
|
23,703 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total costs and expenses |
|
|
346,645 |
|
|
|
323,862 |
|
|
|
265,651 |
|
|
|
196,872 |
|
|
|
164,258 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income from operations |
|
|
100,023 |
|
|
|
94,019 |
|
|
|
85,271 |
|
|
|
67,911 |
|
|
|
52,892 |
|
| Interest expense and other, net |
|
|
(2,619 |
) |
|
|
(2,081 |
) |
|
|
(595 |
) |
|
|
(2,334 |
) |
|
|
(963 |
) |
| Provision for income taxes |
|
|
(35,552 |
) |
|
|
(34,945 |
) |
|
|
(34,041 |
) |
|
|
(27,969 |
) |
|
|
(19,058 |
) |
| Minority interest in losses of subsidiaries |
|
|
28 |
|
|
|
1,142 |
|
|
|
713 |
|
|
|
— |
|
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net income |
|
$ |
61,880 |
|
|
$ |
58,135 |
|
|
$ |
51,348 |
|
|
$ |
37,608 |
|
|
$ |
32,871 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Diluted net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Per common share |
|
$ |
1.08 |
|
|
$ |
1.00 |
|
|
$ |
.89 |
|
|
$ |
.66 |
|
|
$ |
.58 |
|
| Proforma Addback: Goodwill Amortization |
|
|
— |
|
|
|
.06 |
|
|
|
.04 |
|
|
|
.02 |
|
|
|
.02 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Proforma Net Income per Common Share |
|
$ |
1.08 |
|
|
$ |
1.06 |
|
|
$ |
.93 |
|
|
$ |
.68 |
|
|
$ |
.60 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Diluted weighted average common shares outstanding |
|
|
57,104 |
|
|
|
57,919 |
|
|
|
57,957 |
|
|
|
57,027 |
|
|
|
57,078 |
|
| Balance sheet data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cash and cash equivalents |
|
$ |
13,276 |
|
|
$ |
7,280 |
|
|
$ |
13,765 |
|
|
$ |
13,942 |
|
|
$ |
18,434 |
|
| Property and equipment, net |
|
|
119,118 |
|
|
|
130,425 |
|
|
|
115,000 |
|
|
|
87,686 |
|
|
|
70,513 |
|
| Total assets |
|
|
403,802 |
|
|
|
388,048 |
|
|
|
303,752 |
|
|
|
221,047 |
|
|
|
157,066 |
|
| Long term debt |
|
|
16,469 |
|
|
|
38,764 |
|
|
|
14,144 |
|
|
|
6,033 |
|
|
|
1,731 |
|
| Total stockholders’ equity |
|
|
254,868 |
|
|
|
211,597 |
|
|
|
141,045 |
|
|
|
120,933 |
|
|
|
90,042 |
|
| Other data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| U.S. Checkout Coupon stores installed
at end of period |
|
|
16,488 |
|
|
|
15,475 |
|
|
|
13,516 |
|
|
|
12,092 |
|
|
|
11,164 |
|
| International Checkout Coupon stores installed at end of period |
|
|
3,381 |
|
|
|
2,617 |
|
|
|
2,587 |
|
|
|
1,935 |
|
|