Catalina Marketing Provides Update on Color Printer Project
February 27 2006 - 6:45AM
Business Wire
In advance of several meetings with the investment community this
week, Catalina Marketing Corporation (NYSE: POS) today provided an
update on the progress of Catalina Marketing Services' project to
install approximately 140,000 color printers for targeted
communications in its U.S. retail store network. Dick Buell, chief
executive officer, said, "We are pleased with the early progress
made in the project and tests of the inkjet printers at pilot
retail locations are yielding encouraging results. Preliminary
testing in ten pilot stores indicates that the color communications
created with the new printers improved average redemption rates by
more than 25% over Catalina's current black-and-white coupons. In
addition, we are implementing a price increase of two cents per
standard, color communication for CMS programs. The increase in
price reflects the improved value and effectiveness of our
communications." National rollout of the printers and associated
software is expected to begin in mid-2006 and be complete by the
end of 2007. When the printer rollout is complete, color
communications are estimated to account for more than 85% of CMS
distribution. Catalina Marketing anticipates investing
approximately $100 million, primarily in capital expenditures,
through the completion of the installation of the project. The
anticipated increase in capital expenditures in Fiscal 2007 will
increase depreciation expense in Fiscal 2007 and future periods.
The color printers will be depreciated over a seven year life. Rick
Frier, Catalina Marketing executive vice president and chief
financial officer, said, "Although it is still difficult to
forecast the full impact of the project because we are so early in
the rollout, our current models for the color printer project
forecast that Catalina Marketing Corporation will maintain a
consolidated return on invested capital of over 30%. As I mentioned
on our third quarter conference call, we expect that the
significant capital investment in the rollout will utilize our free
cash flow in Fiscal 2007." Frier continued, "We previously
mentioned the new investment in the color printer project will
likely put pressure on CMS operating margins, with the largest
impact in the initial year of roll out. Recently, CMS operating
margins have been favorably impacted by lower than normal
depreciation expense as a result of the continuing operation of
fully depreciated assets. With the elimination of this effect due
to the significant increase in capital expenditures for the new
color printers, as well as other expenses related to the
implementation of the color printer project, CMS operating margins
could be negatively impacted by five to seven percentage points in
Fiscal 2007. On a consolidated basis, primarily as a result of the
color printer project, Catalina Marketing Corporation (CMC)
operating margins are expected to decline by three to four
percentage points in Fiscal 2007, returning to more historical
levels in Fiscal 2008." Summary of Color Print Commercialization
Metrics The following table summarizes the status and estimates of
certain metrics associated with the color printing project. These
metrics are based on preliminary results from a multi-store pilot
program, certain assumptions and estimates regarding the timing of
installation, capital expenditures and expenses related to the
project, and the performance of the color printers once installed
in stores. Further these metrics are subject to the cautionary
language set forth below and the risk factors included in Item 7 of
the Company's Annual Report on form 10-K for the fiscal year ended
March 31, 2005. -0- *T Metric Status / Estimate
----------------------------------
----------------------------------- Stores in current pilot program
20 ----------------------------------
----------------------------------- Installation time frame Mid
2006 through December 2007 ----------------------------------
----------------------------------- Printers scheduled to be
replaced Approximately 140,000 ----------------------------------
----------------------------------- Standard Price Increase $0.02
per standard, color communication
----------------------------------
----------------------------------- Preliminary Redemption (10
store 25%+ higher than black & white test)
----------------------------------
----------------------------------- Speed of Color Printer
Equivalent to the current thermal printers
----------------------------------
----------------------------------- Investment in Color Initiative
Approximately $100 million ----------------------------------
----------------------------------- Depreciable Life of Printers 7
Years ----------------------------------
----------------------------------- FY 2007 Operating Margin Impact
- Decline approximately 5.0 to 7.0 CMS ppts
----------------------------------
----------------------------------- FY 2007 Operating Margin Impact
- Decline approximately 3.0 to 4.0 CMC ppts
----------------------------------
----------------------------------- Return on Capital Over 30% for
Catalina Marketing Corporation ----------------------------------
----------------------------------- *T Investor Conferences
Scheduled Dick Buell, chief executive officer, will present at the
Bear Stearns Investment Conference in Palm Beach, Florida today.
Mr. Buell will also present at Baird's 2006 Business Solutions
Conference in Boston on Wednesday, March 1, 2006. The presentations
will be web cast and will be accessible through the Investor
Relations Calendar of Events section of the company's web site
(http://www.catalinamarketing.com). About Catalina Marketing
Corporation Based in St. Petersburg, Fla., Catalina Marketing
Corporation (www.catalinamarketing.com) was founded over 20 years
ago based on the premise that targeting communications based on
actual purchase behavior would generate more effective consumer
response. Today, Catalina Marketing combines unparalleled insight
into consumer behavior with dynamic consumer access. This
combination of insight and access provides marketers with the
ability to execute behavior-based marketing programs, ensuring that
the right consumer receives the right message at exactly the right
time. Catalina Marketing offers an array of behavior-based
promotional messaging, loyalty programs and direct-to-patient
information. Personally identifiable data that may be collected
from the company's targeted marketing programs, as well as its
research programs, are never sold or provided to any outside party
without the express permission of the consumer. Certain statements
in the preceding paragraphs are forward-looking, and actual results
may differ materially. Statements not based on historic facts
involve risks and uncertainties, including, but not limited to,
potential complications, hardware and software issues and delays
related to the schedule, installation and operation of color
printers, the effectiveness of color printers to increase sales and
redemption rates or provide a more effective advertising medium,
the changing market for promotional activities, especially as it
relates to policies and programs of packaged goods and
pharmaceutical manufacturers and retailers, government and
regulatory statutes, rules, regulations and policies, the effect of
economic and competitive conditions and seasonal variations, actual
promotional activities and programs with the company's customers,
the pace of installation of the company's store network including
as it relates to the installation of color printers in existing and
future retail channels, the acceptance by the company's
manufacturer clients and retailers of color printers and related
new and additional terms and conditions, the success of new
services and businesses and the pace of their implementation, the
company's ability to maintain favorable client and retailer
relationships, the outcome and impact of an ongoing SEC
investigation into certain of the company's prior fiscal years, and
the outcome and impact of the pending shareholder class action and
derivative lawsuits.
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