CATALINA MARKETING CORP/DE - 10-Q Quarterly Report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended December 31, 2004

¨	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 Incorporation or Organization)		(IRS Employer 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)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by checkmark 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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by checkmark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨

At January 31, 2005, the Registrant had outstanding 52,313,155 shares of Common Stock.

CATALINA MARKETING CORPORATION

INDEX


			Page
Part I.	Financial Information

	Item 1.	Financial Statements

		Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended December 31, 2004 and 2003	4

		Unaudited Condensed Consolidated Balance Sheets at December 31, 2004 and March 31, 2004	5

		Unaudited Condensed Consolidated Statement of Changes in Stockholders’ Equity and Comprehensive Income for the nine months ended December 31, 2004	6

		Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended December 31, 2004 and 2003	7

		Notes to Unaudited Condensed Consolidated Financial Statements	8

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20

	Item 3.	Quantitative and Qualitative Disclosure About Market Risk	32

	Item 4.	Controls and Procedures	32

Part II.	Other Information

	Item 1.	Legal Proceedings	34

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34

	Item 6.	Exhibits	35

Signatures			36

Exhibit Index

	Exhibit 31.1	Certification of Chief Executive Officer Pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

	Exhibit 31.2	Certification of Chief Financial Officer Pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

	Exhibit 32.1	Certification of Chief Executive Officer Pursuant to U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

	Exhibit 32.2	Certification of Chief Financial Officer Pursuant to U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Part I. Financial Information

SPECIAL NOTE

References 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.

Item 1. Financial Statements

CATALINA MARKETING CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)


	Three Months Ended December 31,						Nine Months Ended December 31,
	2004			2003			2004			2003
Revenues	$	100,319		$	101,885		$	298,093		$	289,072

Costs and expenses:
Direct operating expenses (exclusive of depreciation and amortization shown below)		26,200			32,479			92,003			99,725
Selling, general and administrative		31,365			31,676			88,705			92,479
Depreciation and amortization		10,202			11,168			32,360			33,504

Total costs and expenses		67,767			75,323			213,068			225,708

Income from operations		32,552			26,562			85,025			63,364

Interest (expense)		(386	)		(1,203	)		(1,123	)		(2,289	)
Other income, net		641			636			1,111			1,761

Income from continuing operations before income taxes		32,807			25,995			85,013			62,836
Provision for income taxes		12,404			10,849			32,394			26,177

Income from continuing operations		20,403			15,146			52,619			36,659
Discontinued operations:
Income (loss) from discontinued operations		292			(18,795	)		(4,002	)		(46,386	)
Gain (loss) on dispositions, net		(1,724	)		—			1,559			—

Loss from discontinued operations		(1,432	)		(18,795	)		(2,443	)		(46,386	)
Cumulative effect of accounting change		—			—			—			(770	)

Net income (loss)	$	18,971		$	(3,649	)	$	50,176		$	(10,497	)

Basic:
Income per common share from continuing operations	$	0.39		$	0.29		$	1.01		$	0.71
Loss from discontinued operations		(0.03	)		(0.36	)		(0.05	)		(0.89	)
Cumulative effect of accounting change		—			—			—			(0.02	)

Net income (loss) per common share	$	0.36		$	(0.07	)	$	0.96		$	(0.20	)

Weighted average common shares outstanding		52,300			52,229			52,266			52,328

Diluted:
Income per common share from continuing operations	$	0.39		$	0.29		$	1.01		$	0.71
Loss from discontinued operations		(0.03	)		(0.36	)		(0.05	)		(0.89	)
Cumulative effect of accounting change		—			—			—			(0.02	)

Net income (loss) per common share	$	0.36		$	(0.07	)	$	0.96		$	(0.20	)

Weighted average common shares outstanding		52,720			52,229			52,334			52,328
Cash dividends declared per share	$	—		$	—		$	0.30		$	—

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

CATALINA MARKETING CORPORATION

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)


	December 31, 2004			March 31, 2004
ASSETS
Current Assets:
Cash and cash equivalents	$	119,437		$	72,704
Accounts receivable, net		55,441			56,963
Inventory		5,133			5,836
Deferred tax asset		6,610			8,536
Prepaid expenses and other current assets		10,083			14,958

Total current assets		196,704			158,997
Property and Equipment:
Property and equipment		364,903			381,999
Less: accumulated depreciation and amortization		(261,951	)		(255,156	)

Property and equipment, net		102,952			126,843
Goodwill		80,495			84,743
Patents, net		12,041			13,472
Other assets		2,197			2,754

Total assets	$	394,389		$	386,809

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	11,366		$	15,372
Income taxes payable		4,268			3,127
Accrued expenses		50,275			65,778
Deferred revenue		26,508			35,730
Short-term borrowings		393			37,016

Total current liabilities		92,810			157,023
Long-term deferred tax liability		14,039			9,827
Long-term debt		61,804			29,908
Other long-term liabilities		3,622			4,475

Total liabilities		172,275			201,233
Commitments and contingencies
Minority interest		—			914
Stockholders’ Equity:
Preferred stock; $0.01 par value; 5,000,000 authorized shares; none issued and outstanding		—			—
Common stock; $0.01 par value; 150,000,000 authorized shares and 52,304,595 and 52,134,462 shares issued and outstanding at December 31, 2004 and March 31, 2004, respectively		523			521
Paid-in capital		5,412			2,485
Accumulated other comprehensive loss		(295	)		(312	)
Retained earnings		216,474			181,968

Total stockholders’ equity		222,114			184,662

Total liabilities and stockholders’ equity	$	394,389		$	386,809

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

CATALINA MARKETING CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’

EQUITY AND COMPREHENSIVE INCOME

(in thousands)


	Comprehensive Income	Number of Shares	Par Value of Common Stock		Paid-in Capital		Accumulated Other Comprehensive Loss			Retained Earnings		Total Stockholders’ Equity
BALANCE AT MARCH 31, 2004		52,134	$	521	$	2,485	$	(312	)	$	181,968	$	184,662
Proceeds from issuance of common stock		171		2		2,323		—			—		2,325
Increase in investment in subsidiary, net of tax		—		—		238		—			—		238
Tax benefit from exercise of non-qualified stock options and disqualified dispositions

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