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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Form 10-K

Commission file number: 1-11008

Catalina Marketing Corporation

(727) 579-5000

Securities registered pursuant to Section 12(b) of the Act:

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 o          No þ

      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.     þ

      Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).     Yes þ          No o

      As of September 30, 2003, the last business day of our most recently completed second fiscal quarter, the aggregate market value of the common stock held by non-affiliates of the registrant (based on the last sales price on that date of $15.19 as reported by the New York Stock Exchange, Inc.) was $740,167,505. The number of shares of registrant’s common stock, par value $0.01 per share, outstanding as of March 31, 2004, was 52,134,462.

TABLE OF CONTENTS

FORM 10-K

PART I

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PART I

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

      References herein to “Catalina Marketing,” the “Company,” “we,” “us” or “our” refer to Catalina Marketing Corporation and its subsidiaries unless the context specifically states or implies otherwise.

      Certain information included in this Annual Report on Form 10-K, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements made in reliance upon the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements may be identified by the use of words such as “anticipate,” “estimates,” “should,” “expect,” “guidance,” “project,” “intend,” “plan,” “believe” and other words and terms of similar meaning, in connection with any discussion of the Company’s future business, results of operations, liquidity and operating or financial performance. Such forward-looking statements involve significant material known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. We cannot assure you that any future results, performance or achievements will be achieved.

      Factors that may cause such differences include, but are not limited to, the changing market for promotional activities, especially as it relates to policies and programs of consumer packaged goods and pharmaceutical manufacturers and retailers; general business and economic conditions; acquisitions and divestitures; risks associated with the Company’s growth and financings; government and regulatory policies affecting the Company and its customers; potential adverse federal, state, or local legislation or regulation or adverse determinations subjecting the Company to additional taxes; the pricing and availability of alternative forms of advertising; product acceptance; the Company’s ability to execute on its various business plans and to test, expand and install its networks in new markets; risks associated with reliance on the performance and financial condition of advertisers and customers; technological developments; changes in the competitive and regulatory environments in which the Company and its customers operate; seasonal variations, actual promotional activities and programs with the Company’s customers; the success of new services and businesses and the pace of their implementation; the Company’s ability to maintain favorable client relationships; the Company’s ability to avoid or mitigate material adverse judgments against, or other adverse results affecting, the Company in the existing United States Securities and Exchange Commission (“SEC”) investigation and shareholder and derivative litigation described in Item 3 — “Legal Proceedings,” or any additional regulatory action, litigation or other proceeding that may be commenced; the Company’s ability to fully address and correct deficiencies and weaknesses in our internal controls and to thereafter maintain an effective internal controls structure; the Company’s ability to attract, motivate and/or retain key employees.

      The Company undertakes no obligation to make public indication of changes in, update or revise any of its forward-looking statements, whether as a result of new information, future events or otherwise.

INTRODUCTORY NOTE

      In this Annual Report on Form 10-K, words such as “today,” “current” or “currently,” or phrases such as “as of the date hereof” or “as of the date of this report,” refer to the date we are filing this Annual Report on Form 10-K with the SEC.

      Catalina Marketing Corporation is filing this Annual Report on Form 10-K for its fiscal year ended March 31, 2003. The filing of this Annual Report on Form 10-K was delayed as a result of the Company’s internal investigations of its financial results for fiscal year 2003, and the resignation of our former independent certified public accountants. Accounting issues arising during the audit of our fiscal year 2003 financial statements and the resignation of our former independent certified public accountants have been disclosed separately under a report on Form 8-K filed by the Company on August 26, 2003, as subsequently amended. Subsequent to the resignation of our former independent certified public accountants, we enlisted the services of PricewaterhouseCoopers LLP (“PwC”), who have completed the audit of our financial statements for fiscal year 2003 and re-audits of our financial statements for fiscal years 2002 and 2001. Such internal

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      Our Quarterly Reports on Form 10-Q for the fiscal quarters ended December 31, 2003, September 30, 2003 and June 30, 2003, also have been delayed as a result of our internal investigations and the re-audits. We intend to file these quarterly reports as soon as possible.

      Ongoing review of our public filings by the SEC may require us to further amend or restate our periodic reports. Additionally, we are not currently in compliance with the listing requirements of the New York Stock Exchange (the “NYSE”), the exchange on which our common stock is listed. As a result, the NYSE may delist our common stock or take other adverse action if we are unable to return to compliance with its listing requirements. These requirements include the obligation to file our periodic reports on a timely basis and hold our annual meeting of stockholders during each fiscal year. We cannot assure you when we will be able to file our delayed quarterly reports. Also, we will not be able to hold our annual meeting of stockholders until after our Annual Report on Form 10-K for the fiscal year ended March 31, 2004 has been filed. We cannot assure you when we will file this report, although we plan to do so as soon as practicable. The NYSE has not taken any delisting or other action against the Company, but there can be no assurance that the NYSE will not take any such action in the future. If we are required to amend or restate our periodic filings, or if the NYSE delists, or attempts to delist, our common stock, investor confidence may be reduced, our stock price may substantially decrease and our ability to access the capital markets may be limited.

      While the selected financial information for fiscal year 2000 included in this Annual Report on Form 10-K is unaudited, the financial information presented for this period is presented on a basis that is consistent with our audited Consolidated Financial Statements for the fiscal years ended 2003, 2002 and 2001 included in this Annual Report on Form 10-K. We have not amended, and do not intend to amend, any of our previously filed annual or quarterly reports. Therefore, financial information that has been previously filed or otherwise reported for these periods should no longer be relied upon and is superseded by the information in this Annual Report on Form 10-K.

Item 1.     Business

General

      Catalina Marketing Corporation, a Delaware corporation, and subsidiaries (the “Company”), is a global leader in the development and distribution of behavior-based communications for consumer packaged goods manufacturers, pharmaceutical manufacturers and marketers, and retailers. Catalina Marketing was founded on the premise that the combination of access to information regarding consumers and insight into their actual purchase behavior, would enable more effective, cost-efficient promotions than traditional marketing approaches. Since the first installation of our network equipment in retail stores in 1984, Catalina Marketing has continued to develop and expand our product offerings. The services of our networks are driven by proprietary, internally developed software.

      The Company’s primary business initially was developed to provide consumers with in-store coupons delivered based upon purchase behavior and distributed primarily in supermarkets. Today, the Company offers behavior-based, targeted-marketing services and programs globally. Employing proprietary technology developed for the Company’s in-store network, the Catalina Marketing Network®, we also offer on-line and at-home access to consumers. These marketing solutions, including discount coupons, loyalty marketing programs, attitudinal research programs, sampling, advertising, in-store instant-win games and other incentives, are delivered directly to shoppers by various means. By specifying how a particular consumer transaction

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      The Company is organized and managed by segments, which include the following operations: Manufacturer Services, Retail Services, Direct Marketing Services (“DMS”), Catalina Health Resource (“CHR”), Catalina Marketing Research Solutions (“CMRS”), international operations, which include both manufacturer and retail services similar to those services provided in the United States (“International”) and Japan Billboard, a billboard and outdoor media business operated in Japan (“Japan Billboard” or “PMKK”). The domestic operations of the Company include Manufacturer Services, Retail Services, DMS, CHR and CMRS. The international operations of the Company are organized and managed by country and include International and Japan Billboard. These segments of our business coordinate their work efforts by providing clients the entire scope of targeted marketing services and enabling clients to better understand, target and change consumer behavior.

      In the United States, as of March 31, 2003, the Catalina Marketing Network®, which supports Manufacturer and Retail Services, was installed in approximately 17,500 retail stores, primarily supermarkets, reaching more than 202 million shoppers weekly. The Health Resource Network was installed in over 17,800 pharmacy outlets reaching more than 19 million prescription medication users weekly as of March 31, 2003. Internationally, our network was installed in over 4,000 retail locations, primarily supermarkets, in Europe and Japan reaching more than 46 million shoppers weekly.

      As of March 31, 2003, the Company employed approximately 1,700 people in offices throughout the United States, Europe and Japan.

Recent Developments

     Restatement of Financial Information for Fiscal Years 2002, 2001 and 2000

      In June 2003, we announced our intent to delay the filing of our Annual Report on Form 10-K for the fiscal year ended March 31, 2003 as a result of certain issues identified by the Company’s management related to the timing of revenue recognition at CHR. At that time, management continued its evaluation of financial data of CHR relating to fiscal year 2003, while the Company’s Audit Committee engaged Ernst & Young LLP (“E&Y”), which replaced Arthur Andersen LLP as our independent certified public accountants in May 2002, to assist in the review and evaluation of the results. In addition, on June 30, 2003, the Company initiated discussions with the Staff of the SEC to advise them of these matters and has continued discussions with the Staff of the SEC throughout this process.

      In July 2003, E&Y expressed concerns over additional areas of accounting, including revenue recognition in Manufacturer Services. On August 26, 2003, we filed a report on Form 8-K with the SEC reporting E&Y’s resignation as our independent certified public accountants and disclosing the following accounting issues identified by E&Y: (i) the timing of the Company’s accounting for revenues derived from its customer arrangements at CHR in light of the discovery by the Company’s management of certain agreements with customers that were not reflected in written agreements and/or considered in connection with the Company’s accounting for the arrangements, and certain other elements of a significant multi-year arrangement, (ii) the timing of the Company’s accounting with respect to revenue recognition at CHR and Manufacturer Services to the extent that certain customer contracts had not been executed by both parties during the period in which the revenue was first recognized for such contracts, (iii) the timing of the Company’s accounting treatment of its customer arrangements in Manufacturer Services and at CHR with respect to certain exclusivity rights granted to customers for the contractual periods of customer arrangements, (iv) the Company’s accounting treatment for certain non-cash transactions in Retail Services, and (v) the Company’s disclosure of segment information for financial reporting.

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      The Company has worked with its new independent certified public accountants, PwC, and, with regard to exclusivity provisions included in contracts of Manufacturer Services, has consulted with the Office of the Chief Accountant of the SEC. Furthermore, the Company has cooperated with the SEC in connection with its investigation by providing the SEC with information and numerous documents, as requested, participating in meetings with the SEC Staff, and making available as witnesses those individuals under its control in response to the SEC’s inquiries and requests in an effort to resolve these matters, as well as other areas identified during the audits of the financial statements for each of the fiscal years 2003, 2002 and 2001. As a result, we are restating our (1) selected financial data for fiscal years 2002, 2001 and 2000; (2) financial statements for the fiscal years ended March 31, 2002 and 2001, and (3) unaudited selected quarterly information for each of the four quarters of fiscal year 2003 and the four quarters of fiscal year 2002. These matters are discussed in more detail in Item 3 — “Legal Proceedings,” Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 3 to our Consolidated Financial Statements included in this Annual Report on Form 10-K.

      The adjustments necessary to restate our financial statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) are discussed in detail in Item 7 — “Management’s Discussion and Analysis of Financial Conditions and Results of Operations.”

      The effects of these adjustments on our Consolidated Financial Statements included in this Annual Report on Form 10-K are presented in Note 3 to the Consolidated Financial Statements and have been reflected where applicable in this Annual Report on Form 10-K.

      Furthermore, in previous filings with the SEC, the Company has disclosed its conclusion that it operated in one reportable segment, targeted marketing services. Upon a closer evaluation of the requirements of Statement of Financial Accounting Standards (“SFAS”) No. 131, “Disclosures about Segments of an Enterprise and Related Information,” the Company has concluded that its business is managed by operating segments, which do not meet all of the aggregation criteria pursuant to SFAS No. 131. As such, segment information has been provided in this Annual Report on Form 10-K pursuant to the requirements of SFAS No. 131. In addition, fiscal years ended March 31, 2002 and 2001 have been restated to provide business segment information on a basis comparable to the fiscal year ended March 31, 2003 reportable segment structure.

     Significant Business Developments and Events Through March 31, 2004

	•	In June 2002, we commenced a tender offer to purchase certain eligible outstanding common stock of CHR, at a purchase price of $33.00 per share. Certain current and former employees and directors of CHR owned the outstanding shares that were purchased in the tender offer. During the fiscal year ended March 31, 2003, the Company purchased 731,921 of the outstanding shares of CHR common stock for approximately $24.2 million. As of March 31, 2003, the Company held 5,771,921 of the total 5,954,047 outstanding shares, or 97%, of CHR common stock. The tender offer expired on October 16, 2002. Since October 2002, no further repurchases of CHR common stock have been made pursuant to this tender offer. The Company intends to purchase the remaining outstanding shares of CHR common stock in fiscal year 2005.
	•	On July 25, 2002, the Board of Directors authorized $85.7 million of funds to be available for the repurchase of our common stock, in addition to the $14.3 million previously authorized, for a total of $100 million of repurchase authorization. During the fiscal year ended March 31, 2003, the Company repurchased 3,132,100 shares of its common stock for a total of $72.0 million, $42.7 million of which was included under the $100 million authorization. During the fiscal year ended March 31, 2004, the Company repurchased 749,200 shares of its common stock for a total of $13.3 million. As of March 31, 2004, approximately $43.9 million remains available under the authorization for the Company to repurchase shares of the Company’s common stock.
	•	In May 2003, the Company, through one of its wholly-owned subsidiaries, purchased the remaining 49% of the voting equity interest in Pacific Media KK (“PMKK”) held by certain minority

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		shareholders of PMKK, pursuant to the exercise of a call option contained in the Purchase Agreement dated October 10, 1996, among the Company, PMKK and certain minority shareholders of PMKK for an aggregate purchase price equal to $23.2 million in cash, based on foreign exchange rates on the payment date. PMKK is now wholly owned by the Company.
	•	In September 2003, the Company’s credit agreement with a syndicate of commercial banks (the “Corporate Facility”), expired and we entered into an agreement to extend the Corporate Facility for 60 days. Our aggregate borrowing capacity was reduced from $150.0 million to $30.0 million. In November 2003, we entered into a Second Amended and Restated Credit Agreement with Bank One, N.A., as Administrative Agent and Wachovia Bank, National Association, as Syndication Agent and Documentation Agent. The Company’s obligations under the Corporate Facility are guaranteed by the Company and certain of its domestic subsidiaries and by assets pledged as collateral. The Corporate Facility expires in August 2004. In November 2003, Catalina Marketing Japan, K.K. (“Catalina Japan”) entered into a credit agreement with Bank One, N.A. (the “Japan Agreement”). The aggregate borrowing capacity under the Japan Agreement is 3.5 billion yen or approximately $31.9 million. Catalina Japan’s obligations under the Japan Agreement are guaranteed by the Company and certain of the Company’s subsidiaries and by assets pledged as collateral. The revolving loan commitment under the Japan Agreement (1.5 billion yen, or approximately $13.7 million) expires in August 2004 and the term loan under the Japan Agreement (2.0 billion yen, or approximately $18.2 million) expires in March 2005. The Japan Agreement replaced the prior credit facility that matured, with extensions, in November 2003 as well as the term loan that would have matured in March 2005.
	•	In November 2003, the Company announced its intent to divest of certain businesses that were deemed not to be strategically aligned with the Company’s current core competencies, including: DMS, CMRS and Japan Billboard. The Company is currently evaluating options with respect to the sale or other methods of divestiture of these businesses.
	•	On March 31, 2004, we sold our loyalty card and data-entry services business located in Farmingdale, New Jersey. Catalina Marketing’s loyalty card and data-entry services business provided application and data processing, card production and fulfillment services related to loyalty card programs for retailers. We intend to continue to work with our retail customers to transition our loyalty card and data-entry services.
	•	Throughout fiscal year 2004, there were significant changes to our senior management team and several members of our Board of Directors. In addition, during this same period, our senior management team devoted a significant amount of time conducting internal investigations, restating our financial statements, reviewing corporate governance procedures and responding to government inquiries. See Item 10 — “Directors, Executive Officers and Other Significant Employees” in Part III of this Annual Report on Form 10-K for a description of our current executive officers and members of our Board of Directors.

Business Segment Information

     General

      The Company offers behavior-based, targeted-marketing services and programs globally. The Company is organized and managed by segments, which include the following operations: Manufacturer Services, Retail Services, DMS, CHR, CMRS, International and Japan Billboard. The domestic operations of the Company include Manufacturer Services, Retail Services, DMS, CHR and CMRS. The international operations of the Company are organized and managed by country and include International and Japan Billboard. These segments of our business coordinate their work efforts by providing clients the entire scope of targeted marketing services and enabling clients to better understand, target and change consumer behavior.

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      Financial information regarding segment revenues, net income and total assets and geographic information regarding geographic revenues and long-lived assets for each of the fiscal years 2003, 2002 and 2001 is presented in Note 17 to the Consolidated Financial Statements.

     Manufacturer Services

      Manufacturer Services serves the needs of domestic consumer product manufacturers, primarily within the consumer packaged goods industry. Using the Catalina Marketing Network®, this operating group specializes in behavior-based marketing communications that are delivered at the point-of-sale. The primary service line of the Catalina Marketing Network® is the in-store delivery of incentives at the checkout lane of a retailer, typically a supermarket. Catalina Marketing links its proprietary software, computers, central databases and thermal printers with a retailer’s point-of-sale controller and scanning equipment. The network prints customized promotions at the point of sale based on product Universal Product Codes or other scanned information. The printed promotions are handed to consumers by the cashier at the end of the shopping transaction. Our customers contract with us to deliver promotions for them and typically pay us a fee for each promotion delivered. In general, Manufacturer Services recognizes revenue at the time a promotion is delivered at the checkout counter of the retail store based on a per promotion charge.

      The primary objective of Manufacturer Services’ sales efforts is to assist consumer packaged goods manufacturers with the design of programs that deliver results that achieve their brand objectives. The sales and client service teams consult with current and prospective clients to develop and implement customized, targeted marketing programs that meet specific brand strategies and objectives.

      The Company’s Manufacturer Services segment generates revenue primarily by providing in-store, electronic marketing delivery services via the Catalina Marketing Network®. The amount of revenue recognized is based on the total incentives delivered times a per-print fee. Delivered incentives include targeted promotions, messages and sweepstakes. The Company generally bills customers a minimum category fee in advance of the actual delivery. Contracts for delivery include a minimum number of targeted promotions or messages for a specified category, or categories, within a four-week period referred to as a “cycle.” The delivery is based upon particular triggering transactions that are registered at the point of sale (i.e., the checkout counter of a retail store). The majority of our contracts cover multiple cycles.

      Redemption processing of these promotions is similar to that of traditional manufacturer coupons. In this regard, retailers provide discounts to consumers who present the coupons. The retailers send redeemed coupons to clearinghouses, and receive reimbursements for the discounts provided, including handling fees from the manufacturers.

      The two predominant programs of Manufacturer Services are: Checkout Coupon® and Checkout Direct®. Through its Checkout Coupon® service, Catalina Marketing delivers marketing communications to consumers at checkout, based on the products included in their current shopping basket. Catalina Marketing delivers marketing communications to consumers at the checkout counter based on past purchase behavior though its Checkout Direct® service.

      Manufacturer Services had a single client, Nestlé, that accounted for approximately 17.1%, 13.1% and 11.5% of revenues generated by this segment for the fiscal years ended March 31, 2003, 2002 and 2001, respectively. In addition, sales to another client accounted for 9.6%, 9.5% and 10.4% of revenues generated by this segment for the fiscal years ended March 31, 2003, 2002 and 2001, respectively. We believe that the loss of either Nestlé or the other client referred to above would have a material adverse effect on Manufacturer Services. In addition, we believe the loss of Nestlé would have a material adverse effect on the Company taken as a whole.

     Retail Services

      Retail Services provides innovative customer marketing solutions to over 80 retail chains nationwide. The primary objective of this operating group is to support, maintain and expand the Catalina Marketing Network® used by Manufacturer Services. In addition to this primary objective, this operating group provides services to

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      Catalina Marketing typically enters into agreements with retail chains to install its network in the retail stores of the chain for an initial period of three or more years. In certain circumstances, the retailer pays a one-time fee as a partial reimbursement for the cost of the installation. In general, Catalina Marketing pays distribution fees to, and exchanges services with, the retailer based on the number of promotions printed. Because of the concentration of ownership in the retail grocery industry, we are dependent on a limited number of retailers that supply the points of distribution for our manufacturer customers’ printed promotional materials. Approximately 55% of the printed in-store promotional incentives we provided for our customers during the fiscal year ended March 31, 2003, were generated from within the stores belonging to five retail chains. If any of these retail chains were to decide to not renew their contract with us to provide point-of-sale services, or if they reduce the number of point-of-sale locations, a material reduction in our revenues could result if we were unable to replace these point-of-sale locations.

      Catalina Marketing owns the equipment installed in each retail store which consists of a thermal printer at each checkout lane linked by a computer on the retailer’s premises to the retailer’s point-of-sale controller and scanning equipment. Catalina Marketing operates two data processing facilities in the United States that employ various technologies to transmit promotional instructions to personal computers installed in retail stores and retrieve program data. All of the equipment and supplies, including computers, printers and paper, used in a retail installation, are purchased by the Company from outside sources. All of the store equipment and supplies used by our network are managed, installed and maintained by our corporate support staff for all of our operating segments. While we currently use a limited number of primary suppliers, Catalina Marketing believes that alternate sources of supply are available without material interruption to the Company’s business.

     DMS

      DMS provides services designed to reach consumers in their homes. DMS analyzes frequent shopper databases and identifies consumer lifestyle changes to develop strategic programs that meet multiple objectives for both brand manufacturers and retailers. These targeted direct mail programs are based on actual purchase behavior or consumer lifestyle changes. DMS provides services which enable manufacturers and retailers to influence the purchase patterns of targeted customers based on their actual purchase behavior and history. Clients use these services to support new product launches and line extensions, build loyalty to a brand and deliver timely messages to consumers.

      The Company’s specific product offerings include Sample Logic®, Retail Solutions and One-to-One Direct®. Sample Logic® uses consumer purchase data provided by our retailers to deliver targeted product samples and promotions to consumers’ homes. Retail Solutions develops and delivers direct mail customer campaigns, as well as customer reward and loyalty strategies. One-to-One Direct® delivers coupons from multiple consumer products goods manufacturers, using data provided by our retailers, to consumers in their home in a single mailing. The Company suspended the One-to-One Direct® service in December 2003.

      DMS had a single client that accounted for approximately 16.2%, 0.6% and 0.7% of revenues generated by this segment for fiscal years ended March 31, 2003, 2002 and 2001, respectively. We believe that the loss of this client would have a material adverse effect on DMS, but not on the business of the Company taken as a whole.

      In November 2003, the Company announced its intention to divest the DMS operations. See “Significant Business Developments and Events Through March 31, 2004.”

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     CHR

      CHR services allow pharmaceutical and consumer product goods manufacturers, as well as retail pharmacies, to provide consumers with condition-specific health information and direct-to-patient communications. CHR’s programs and services give the Company’s customers the ability to acquire and retain patients by providing educational information about their treatment along with the benefits of compliance, and by encouraging dialogue between patients and their health care professionals.

      CHR’s primary product offerings use an in-store, prescription-based technology to provide targeted, direct-to-patient communications on behalf of the Company’s customers. These communication services include messages and educational information to healthcare patients at pharmacies throughout the Health Resource Network. The Health Resource Network is a proprietary software system that gives pharmaceutical manufacturers and retailers the opportunity to effectively communicate with patients based on their prescription buying behavior and assists patients in making more informed healthcare decisions while preserving their privacy.

      CHR primarily generates revenues by printing messages for pharmaceutical manufacturers and consumer packaged goods manufacturers. These messages are created for the pharmacy’s customer when a prescription is purchased, based on that particular drug’s National Drug Code symbol. The message promotes prescription medications or other products in the retail store.

      The Health Resource® Newsletter is CHR’s primary client offering. Distribution of the newsletter is triggered by the National Drug Code found on all prescription drugs and targeted to the consumer based on the National Drug Code, age, gender, third-party payer, or whether the medicine is prescribed for the first time or a refill, but not by name, address, or other personally identifiable information. When a prescription is processed via the Health Resource Network, this customized newsletter with prescription information, therapeutically relevant editorial content and product information, is printed in the pharmacy and given to consumers by their pharmacist when they get their medication.

      CHR enters into agreements with pharmacy retail chains to install the Health Resource Network in pharmacies within the chain. Upon installation, the retailer generally agrees to use the Health Resource Network in its pharmacy for a minimum period of time, typically three years. CHR pays distribution fees to, and exchanges services with, the pharmacy based on the number of Health Resource® newsletters printed.

      The Health Resource Network operates using a printer linked by an on-premises computer to the pharmacy’s point-of-sale controller and scanning equipment. Certain versions of the software eliminate the need for a computer in each location, in which case, only a printer is located in those pharmacies. CHR operates a data processing facility that communicates via various technologies with the computers installed in the pharmacies to send promotional instructions and retrieve program data. In some cases, CHR installs and owns the equipment. In other cases, the equipment is owned by the pharmacy retailer. All of the equipment owned by us is generic and purchased from third-party vendors. Typically, pharmacies are contractually obligated to provide supplies, including toner and paper. The Company believes that we can secure alternate sources of equipment and supplies without significant interruption to CHR’s business.

      CHR’s client base varies from year to year and as such a client may be significant in one year and not in another. CHR’s top five clients accounted for 52.1%, 53.7% and 43.6% of revenue in fiscal years 2003, 2002 and 2001, respectively.

     CMRS

      CMRS provides a wide range of traditional marketing research services, including tracking studies and customer satisfaction surveys, as well as proprietary research products that take advantage of the Company’s behavioral data gathered throughout the Catalina Marketing Network®.

      The primary objective of CMRS is to increase penetration within existing client relationships and develop new client relationships. New business development strategies include targeting leaders in a number of service industries such as healthcare, technology and restaurants as well as consumer packaged goods manufacturers.

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      CMRS had a single client that accounted for approximately 18.7%, 15.5% and 12.5% of revenues generated by this segment for the fiscal years ended March 31, 2003, 2002 and 2001, respectively. We believe that the loss of this client would have a material adverse effect on CMRS, but not on the business of the Company taken as a whole.

      In November 2003, the Company announced its intention to divest the CMRS operations. See “Significant Business Developments and Events Through March 31, 2004.”

     International

      All financial and statistical results of the Company’s wholly and majority owned foreign subsidiaries are included for the twelve-month period ending December 31 which is their fiscal year end.

      As of the end of fiscal year 2003, the Company provided in-store electronic targeted marketing services for consumers in the United Kingdom, France, Italy and Japan. The Catalina Marketing Network® operates internationally in a similar manner as the domestic business in offering a full range of targeted marketing solutions to many of the top 100 consumer packaged goods manufacturers and enjoys relationships with major supermarket retailers based on a syndicated platform. At the end of fiscal year 2003, the network was installed in 3,551 retail locations in Europe and 518 locations in Japan and reached more than 46 million consumers weekly. In France, the Company has been operating since 1994 and as of the end of fiscal year 2003 the Catalina Marketing Network® was installed in 2,632 retailers across 12 supermarket and hypermarket chains. In Italy, Catalina began operations in 2000 and was partnered with seven major retail chains and 318 stores at the end of the fiscal year. In the United Kingdom, the Catalina Marketing Network® was installed in 601 stores. In Japan, the network was launched in 1997 and was in 518 stores across six retail chains, of which three were among the top five general merchandise chains. In fiscal year 2004, the Company continued to expand its behavior-based targeting capabilities in Europe by launching a pilot test in Germany.

      International had a single client, Nestlé, that accounted for approximately 10.1%, 12.1% and 6.7% of revenues generated by this segment for the fiscal years ended March 31, 2003, 2002 and 2001, respectively. We believe that the loss of this client would have a material adverse effect on this business segment. However, the loss of the International revenue generated by Nestlé would not have a material effect on the Company, taken as a whole. See “Manufacturer Services.”

      In fiscal year 2003, International sales accounted for approximately 6.4% of our total revenues. Our international operations are subject to the normal risks of foreign operations, including: changes in local business and economic conditions, political uncertainties, adapting to different regulatory requirements, interest rate movements, uncertainties of litigation, increasing consolidation of retailers and consumer products goods manufacturers, competition, pricing pressure, seasonality and changing customer and client preferences. Certain of these risks have affected our business in the past and may also have a material adverse effect on our business, results of operations and financial condition in the future. In addition, sales in our international operations are billed in foreign currencies and are subject to currency exchange fluctuations as are intercompany royalties and financing activities. In prior years, changes in the value of the U.S. dollar compared to foreign currencies have had an impact on our sales and margins. We cannot predict the direction or magnitude of currency fluctuations. The Company, where practical, purchases goods and services in local currencies. The Company borrows locally to meet its financing requirements in Japan to obtain certain natural and economic hedges.

      In all jurisdictions in which we operate, we are also subject to the laws and regulations that govern foreign investment, foreign trade and currency exchange transactions. These laws and regulations may limit our ability to repatriate cash as dividends or otherwise to the United States and may limit our ability to convert foreign currency cash flows into U.S. dollars.

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     Japan Billboard

      Pacific Media, KK is a wholly-owned subsidiary of the Company that operates a billboard and outdoor media business in Japan. PMKK primarily owns and rents billboards which are displayed on rooftops or faces of buildings in locations suitable for advertising. Advertising is sold either directly to a broad range of leading clients across multiple industries or through advertising agencies. In general, billboards are designed by and produced under the supervision of PMKK. Upon completion and installation, the billboards are financed through third-party financing companies. PMKK is required to make rental payments to building owners for the space on the rooftops and faces of buildings where the billboards are installed. PMKK provides the maintenance for their billboards during the life of the contract, which generally ranges from three to five years.

      Japan Billboard had a single client that accounted for approximately 74.9%, 71.9% and 67.7% of revenues generated by this segment for the fiscal years ended March 31, 2003, 2002 and 2001, respectively. This client produces tobacco products and is subject to the rules and regulations that govern that industry. This client has substantially reduced its spending with PMKK and this has had a material adverse effect on Japan Billboard, but not the business of the Company taken as a whole.

      The passage and implementation of the Voluntary Global Tobacco Marketing Initiative (the “Initiative”) in fiscal year 2002 has significantly affected the manner in which tobacco companies in Japan are permitted to market, promote and advertise its products. As a result of the implementation of this Initiative, PMKK’s primary client began to reduce their advertising expenditures for billboards significantly, as well as other media and promotional spending. The Initiative, as it relates to outdoor tobacco advertising, mandates that the maximum visual dimension of any billboard advertisement be limited to 35 square meters. As a result, a significant number of PMKK’s sales contracts covering a broad network of large-sized billboards with this client were either terminated or not renewed. In those cases, PMKK has actively sought replacement business to forestall the significant cost of sign removal and cultivate new revenue streams.

      In January 2004, Japan’s Ministry of Health announced its intention to sign and ratify the international Framework Convention on Tobacco Control recently adopted by the World Health Organization. This convention will become effective once it has been adopted by 40 countries. The adoption of this convention will further limit tobacco companies’ ability to advertise tobacco products on billboards in Japan. The effects of this ruling are significant to Japan Billboard, and the Company expects a further reduction in revenues from its single significant client.

      In November 2003, the Company announced its intention to divest the PMKK operations. See “Significant Business Developments and Events Through March 31, 2004.”

     Competition

      Competition in the targeted 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. The Company’s segments, Manufacturer Services, Retail Services, DMS and International, compete with various traditional coupon delivery methods including free-standing inserts, 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 other advertising delivery methods. CHR competes for pharmaceutical budget dollars with a wide range of media, including television, publications, direct mail, and other alternate sources of direct-to-consumer communication. Competition for CMRS comes from a broad array of national, regional and local marketing research firms.

      Catalina Marketing competes for advertising, promotional and research dollars based on the efficiencies of the Company’s networks, its ability to accurately and effectively target potential consumers, the number of shoppers reached, and the Company’s ability to deliver consumer insights and influence consumer buying behavior.

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     Research and Development

      The Company’s research and development efforts are generally for pilot-project execution to create, test and support new applications for the Catalina Marketing and Health Resource Networks, market research, software development, and system upgrades. For each of the fiscal years ended March 31, 2003, 2002 and 2001, expenditures for research and development were $5.1 million, $4.5 million and $4.4 million, respectively.

     Intellectual Property

      Catalina Marketing currently holds, and has pending, numerous United States and foreign patents relating to Catalina Marketing products and services. These patents include the initial targeted incentive core patents as well as improvements and additional inventions related to Catalina Marketing’s current and contemplated business, programs and services. In addition, the Company regards certain computer software in the Catalina Marketing Network® and each additional service application as proprietary and subject to copyright protection. Catalina Marketing also holds, and has pending, numerous service marks and trademarks related to its entities, businesses, products, and services that have associated goodwill in the relevant marketplace. Catalina Marketing believes that certain intellectual property owned or licensed by the Company gives us a competitive advantage in key geographic regions in which we operate. While we continue to pursue protection for intellectual property rights developed by the Company, certain of our patents, over time, will expire and there is no guarantee that we will be able to secure additional patent rights. The expiration of a core patent or loss of patent protection resulting from a legal challenge may result in significant competition from third parties with respect to the covered product or service in a short period of time. The actual protection afforded by a patent, which can vary from country to country, depends upon the type of patent, the scope of its coverage and the availability of legal remedies in the relevant country. Although we believe that the Company’s intellectual property provides us with a competitive advantage, we believe that we are not dependent upon a single patent, or a specific series of patents, the loss of which would have a material adverse effect on our business. In appropriate situations, we seek to protect our proprietary intellectual property rights vigorously.

     Government Regulation

      Our operations are subject to regulation in the United States and in other countries in which we do business. Generally, we are subject to federal and state laws governing the privacy and the use of consumer information collected by us. In the United States, various federal agencies including the United States Food and Drug Administration (“FDA”) and various state agencies have promulgated regulations that restrict the advertising of tobacco, dairy and alcohol products. Specifically, CHR operates in a highly regulated business environment and is subject to direct regulation by the FDA and anti-kickback laws. For a discussion of government regulations on our international operations, see “Business Segment Information-International.”

     Available Information

      The Company is subject to the information requirements of the Exchange Act. Therefore, the Company files periodic reports, proxy statements and other information with the SEC. Such reports, proxy statements and other information may be obtained by visiting the Public Reference Room of the SEC at 450 Fifth Street, NW, Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers that file electronically.

      The Company’s website is www.catalinamarketing.com. The Company makes available, free of charge, on or through its website, its annual, quarterly and current reports and any amendments to those reports, as soon as reasonably practicable after electronically filing such reports with the SEC. Information posted on the Company’s website is not part of this report.

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Item 2.     Properties

      The Company’s headquarters is located in St. Petersburg, Florida. This 142,857 square foot facility houses the Company’s principal administrative, marketing, information technology and product development offices. The Company leases this facility through a variable interest entity which is partially funded by a third party financial institution. The Company has included the value of the building and the related indebtedness in its Consolidated Financial Statements in accordance with FASB Interpretation No. 46: Consolidation of Variable Interest Entities — An Interpretation of ARB No. 51 (“FIN 46”). As of March 31, 2004, the Company leased an additional 18 sales and support offices across the United States, consisting of approximately 245,000 square feet in the aggregate, and five offices for its foreign operations. The Company believes that the headquarters facility, along with the existing sales and support offices, are adequate to meet its current requirements and that suitable additional space will be available as needed to accommodate growth of its operations and sales and support office requirements for the foreseeable future.

Item 3.     Legal Proceedings

Government Investigations

      As previously disclosed, on March 4, 2004, the SEC issued a formal order of private investigation that made formal an informal investigation previously initiated by the SEC. The informal investigation was initiated by the SEC after representatives of the Company contacted the SEC on June 30, 2003, to inform the Staff of certain revenue recognition timing issues that management of the Company identified at CHR. The Company believes that the SEC inquiry is focused primarily on the revenue recognition timing issues at CHR during fiscal years 2003, 2002 and 2001, which fiscal years are the subject of the various adjustments and restatements described in this Annual Report on Form 10-K. See Part II, Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations” below for more information about our restatement. Since the initiation of the informal investigation and through the date of the filing of this Annual Report on Form 10-K, the Company has been cooperating with the SEC in connection with its investigation, including through in-person meetings between Company representatives and the SEC Staff, and the provision to the SEC of information and numerous documents. In addition, the Company has made available as witnesses those individuals under its control in response to the SEC inquiries and requests. Other than the SEC investigation, as of the date hereof, the Company is not aware of any additional inquiry or investigation having been commenced against the Company related to these matters, but it cannot predict whether or not any such regulatory inquiry or investigation will be commenced or, if it is, the outcome of any such inquiry or investigation. If the investigation was to result in a regulatory proceeding or action against the Company, the Company’s business and financial condition could be harmed.

Securities Actions and Derivative Actions

      The Company, and certain present and former officers and directors of the Company and CHR, were named as defendants in numerous complaints purporting to be class actions which were filed in the United States District Court for the Middle District of Florida, Tampa Division, alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The actions are brought on behalf of those who purchased the Company’s common stock between January 17, 2002 and August 25, 2003, inclusive. The complaints contain varying allegations, including that, during the alleged class period, the defendants issued false and misleading statements concerning the Company’s business and operations with the result of artificially inflating the Company’s share price and maintained inadequate internal controls. The complaints seek unspecified compensatory damages and other relief. In October 2003, the complaints were consolidated in the United States District Court for the Middle District of Florida and given the caption In re Catalina Marketing Corporation Securities Litigation, Case No. 8:03-CV-1582-T-27TBM. In December 2003, Virginia P. Anderson and the Alaska Electric Pension Fund were named as co-lead plaintiffs (the “Lead Plaintiffs”). In January 2004, the Court ordered that Lead Plaintiffs file their Consolidated Amended Class Action Complaint 30 days after the filing of the Company’s revised financial statements. We intend to vigorously defend against these lawsuits. We cannot currently predict the impact or resolution of this litigation

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      Certain present and former officers and directors of the Company and CHR, and Catalina Marketing, as a nominal defendant, have been named in two shareholder derivative actions entitled The Booth Family Trust v. Frank H. Barker, et al., Case No. 20510-NC, commenced in the Court of Chancery for the State of Delaware in and for New Castle County, and Craig Deeds v. Frank H. Barker, et al., Case No. 04-000862 commenced in the Circuit Court of the Sixth Judicial Circuit in and for Pinellas County, Florida. These shareholder derivative lawsuits allege that the defendants breached various fiduciary duties based upon the same general set of alleged facts and circumstances as the federal shareholder suits. The plaintiffs seek unspecified compensatory damages, restitution of improper salaries, insider trading profits and payments from the Company, and disgorgement under the Sarbanes-Oxley Act of 2002. In December 2003, these actions were stayed pending a ruling by the district court on the anticipated motion to dismiss the Consolidated Amended Class Action Complaint in the federal securities action. We cannot currently predict the impact or resolution of this litigation or reasonably estimate a range of possible loss, which could be material, and the resolution of these lawsuits may harm our business and have a material adverse impact on our financial condition.

Patent Litigation Action

      In May 2002 the Company was sued by Expanse Networks, Inc. (“Expanse”) for patent infringement in the United States District Court for the Eastern District of Pennsylvania. The case is currently scheduled for trial in July 2004. Expanse alleges that the Company infringes two Expanse patents directed to certain specific computer implemented methods for mathematically processing consumer purchase history data to generate and then use a consumer profile. Expanse seeks damages and injunctive relief in the case. The Company has denied Expanse’s claims based on, among other defenses, its assertion that the Company is not infringing the Expanse patents at issue in this action. In addition, the Company believes that, in the event that the Court determines that any of the Company’s various business activities are covered by the Expanse patents, the Expanse patents are invalid for various reasons, including that they are subject to prior use and activities that render the patents invalid. The Company intends to continue to vigorously defend itself in connection with this matter and does not believe that this matter will be resolved in a manner which is materially adverse to the Company.

Item 4.     Submission of Matters to a Vote of Security Holders

      No matters were submitted to a vote of security holders during the fourth quarter of fiscal year 2003 or through the date of the filing of this Annual Report on Form 10-K.

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PART II

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, for each quarter period of the last two fiscal years and for each quarter of fiscal year 2004, the high and low closing prices as reported by the NYSE for the common stock for the quarters ended as follows:

B.     Stockholders

      As of March 31, 2004, there were approximately 800 registered holders of shares of common stock.

C.     Dividends

      The Company has not paid any cash dividends to date, and there are no current plans to pay cash dividends in the future. For a discussion of restrictions on the Company’s and its subsidiaries’ ability to pay dividends contained in certain of our debt instruments, see Note 9 to the Consolidated Financial Statements.

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D.     Securities Authorized for Issuance Under Equity Compensation Plans

Equity Compensation Plan Information

      This table sets forth information relating to the Company’s equity compensation plans as of March 31, 2003.

*	Included in this total are (i) 226,058 shares remaining available for issuance under the Company’s Employee Payroll Deduction Stock Purchase Plan, (ii) 250,000 shares remaining available for issuance under the Company’s 2002 Director Stock Grant Plan and (iii) 5,417,326 shares remaining available for issuance under the Company’s 1999 Stock Option Plan.

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Item 6.     Selected Financial Data

SELECTED CONSOLIDATED FINANCIAL DATA

      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 on Form 10-K. The following selected consolidated financial data for the fiscal years ended March 31, 2003, 2002 and 2001 is derived from our audited Consolidated Financial Statements.