Shareholders' lawsuit filed against Acxiom.

Just as Acxiom Corp. was trying to put a round of personnel cuts and criticism about some financial practices behind it, the company was hit last week with a shareholder lawsuit.

Some analysts remain confident about the company, still rating it a good investment. Questions continue to crop up, however, about the nature of the personnel cuts at the Little Rock-based company, Which was rated earlier this year as one of the best places in the country to work.

Little Rock lawyer Steven E. Cauley and the California law firm of Milberg Weiss filed a shareholders lawsuit Sept. 20 in U.S. District Court in Little Rock seeking class-action status for investors they say were misled by false financial information issued by the company. Both law firms are known for taking on companies on behalf of shareholders.

The lawsuit claims false financial information issued by the company pumped up the price for a July stock offering. Then, when Acxiom confirmed news that it was cutting 5 percent of its work force and an Aug. 30 article in financial weekly Barron's questioned accounting practices used to meet earnings expectations, the stock's price plummeted.

A company spokesman called the lawsuit "groundless" and "without merit."

Jack Clarke, an analyst for PaineWebber in New York, says shareholder lawsuits are not uncommon when a company reports negative financial information.

The suit was filed on behalf of Larry R. Romine, who, according to the suit, bought 250 shares of Acxiom stock at $27 a share on July 23 during an offering of more than 1.5 million shares by the company and 3.9 million shares by the Pritzker Foundation, a private foundation involving Acxiom board director Robert A. Pritzker. Acxiom CEO Charles D. Morgan, chief financial officer Robert S. Bloom, chief operating officer Rodger S. Kline and Pritzker are also named as defendants in the lawsuit.

By Sept. 16, the stock had fallen nearly $11, to about $16.37 a share. In the days following the filing of the lawsuit last Monday, the stock edged back above $17 a share.

Three days before the stock offering, Acxiom released a report on its first quarter for Fiscal Year 2000, which ended June 30. The company reported record revenue and earnings, with net earnings at $15.7 million (18 cents diluted earnings per share).

That information was included on the prospectus for the July 23 stock offering.

On Aug. 16, the company filed its first quarter results with the Securities and Exchange Commission. The lawsuit points to several "surprises" for investors, including a 17 percent increase in accounts receivable and a decrease in the allowance of doubtful accounts.

The company then opted to make a $2.3 million adjustment in its salaries expense by reversing a portion of a liability - boosting earnings by two cents a share. Acxiom also reported a 5 percent decrease in revenue from its largest customer, insurance company Allstate.

Acxiom officials say they renegotiated the contract, charging less for one service they were providing Allstate in return for access to a new avenue of business.

By the close of trading Aug. 17, the stock price closed at $21.06 - down from the previous close of $23.59.

On Aug. 26, company leaders told employees of a plan to reduce the number of employees by 5 percent, cutting out the "lowest contributors." The reduction was disclosed by some employees to the Log Cabin Democrat in Conway, which first reported the story Aug. 29.

Then on Aug, 30 came the Barron's article, "Day of Reckoning For Acxiom?" It noted the revised Allstate contract, which critics saw as proof of pricing pressure from competitors.

It also quoted critics about the liability reversal, terming it questionable and possibly used to meet earnings expectations.

The observers cited an increase in the days sales outstanding, the ratio of accounts receivable to sales. According to the company's quarterly report, that DSO number had grown from 80 days in the previous quarter to 89 days in the quarter that ended in June.

Acxiom's stock price closed on Aug. 27 at $20.56. By Aug. 31, it had fallen to $17.56.

Moving On, Looking Back

In the wake of the Barron's piece, Acxiom spokesman Dale Ingram disputed some of its conclusions. Some analysts agreed, downplaying the article's importance.

The company is already addressing the DSO problem, Ingram says, assigning personnel to concentrate on bringing the number down. "We're hopeful that we'll be able to report improvements when the next quarterly results are announced at the end of October."

Ingram insists Acxiom is moving on and most of the planned personnel cuts are completed. He emphasizes the cuts were not a layoff, which he says occur when business is bad.

"Business is booming," Ingram says. "Our intent is to get the right people in the right place at the right time."

There are still claims showing up in places like Internet bulletin boards devoted to the company that insist those who lost their jobs weren't all low performers, that some cuts were made by supervisors forced to meet certain goals. There are also claims that employee lawsuits will be next.

Asked about contentions that the cuts included positions as well as personnel, Ingram wouldn't elaborate. "The nature of any individual decisions and classification of any associates is between the associate and the company," he says.

Departing employees were offered "standard terms" in severance packages, Ingram says, again not elaborating if there were items such as a waiver of suit provision to prevent the former employees from suing the company. Nor would he say if any of the employees might be eligible for rehiring, reiterating that that information is between the employee and the company. The employees were eligible for outplacement assistance in finding other work, he says.

Asked if all of the fired employees were considered lowest contributors, Ingram says only, "That was the intent of the program."

Acxiom is still hiring, Ingram says, and currently has 126 job openings (80 of those in Arkansas). About 100 new employees were hired in August with about 40 so far in September, he says.

Analysts still have faith in the company as well. Eleven brokers rate Acxiom a "strong buy," while three others rate it a "moderate buy."

"We think it will eventually climb back to the high 20s," says Bear Stearns analyst Alexia Quadrani of the stock price. "The earnings are fine. I think the questions were about cash flow and the days sales outstanding, but we expect those to get better."