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Catalina chief resigns under pressure

Dan Granger, chairman and chief executive of Catalina Marketing Corp. since 1998, has resigned under pressure as questions linger about the company's financial reporting and long-term strategy.

Catalina's board coaxed Michael O'Brien, one of the company's five co-founders, to come out of retirement at age 60 to run the St. Petersburg company until a permanent replacement is found.

That might be a while. Michael Bechtol, the chief operating officer who some thought was being groomed to take over eventually, abruptly resigned in August, citing personal reasons. The search firm hired to recruit candidates for his replacement now is looking for prospects for the CEO's job as well.

Granger, 54, resigned after the market closed Friday with an undisclosed severance package, but no announcement was made until Monday. The resignation from a job that paid $700,000 in 2001 was effective immediately. He had been a Catalina executive for 14 years.

"The board felt it was time for some new perspective," said Susan Gear, spokeswoman for the company that's best known for its electronic coupon printers. They are a familiar sight at the checkout counters of supermarkets across the country, including Kash n' Karry, Albertsons and Winn-Dixie locally.

Granger could not be reached for comment at his Tarpon Springs home. Neither could Frederick Beinecke, a board member who took over as chairman. O'Brien was said to be too busy meeting the management team on his first day on the job to grant interviews. Friends, however, said O'Brien was the right fit for the job.

"He's a great entrepreneur who runs a very tight ship," said Patrick Collins, a former Catalina board member and retired chief operating officer of Ralph's, a California supermarket chain. "If anybody can fix this company, Mike's the one. Catalina lost focus and just had too many experiments that did not pan out."

O'Brien, who lives in St. Petersburg, was one of five executives who founded Catalina in 1983. All were familiar with the supermarket and packaged goods industries and the emerging use of laser scanning. The company's name came from a weekend boating trip to Catalina Island off California, during which the five conceived of the idea for the company that became one of the pioneers of database marketing. O'Brien left as Catalina's CEO in 1992, a year before the company moved its corporate headquarters from suburban Los Angeles to St. Petersburg.

O'Brien's return comes during a turbulent time for Catalina. The growth of the company, once a Wall Street darling, was stalled by the advertising recession of 2002. Then questions were raised about how the company had accounted for certain revenues. The issues were cited by Ernst & Young, which took over the auditing account by hiring and then replacing the auditing team from Arthur Andersen LLP that had been doing the work. Andersen went out of business after its entanglement in the Enron scandal.

Ernst & Young resigned on Aug. 20 after refusing to issue a clean audit for Catalina's 2003 fiscal year that ended March 31. While new auditors from PricewaterhouseCoopers go over the books, Catalina has yet to file any audited financial statements with the Securities and Exchange Commission this year.

Some analysts think the worst of the company's accounting troubles are coming to an end because Catalina recently indicated it had continued strong cash flow growth during the quarter that ended Sept. 30. That suggested the accounting issues in question were about timing of when revenues were recorded, not whether they should count as revenues, said Larry Lee, a CIBC World Markets analyst who upgraded Catalina stock on Monday.

"Most of the bad news has already been absorbed in the stock price, which has been trading close to historic all-time lows," said Lee. Catalina shares closed Monday at $17.95, up 30 cents.

With Catalina's printers in more than half the supermarkets in the United States, Granger's biggest challenge had been taking its coupon printer technology and 159 patents to new markets and new industries. In 2000 he ambitiously tried to reshape Catalina and its gold-plated client list, which ranges from Armour to Procter & Gamble, into a full-service marketing company for the packaged goods industry. He thought he could double the company's annual revenues to $1-billion within a few years.

Yet Catalina's penetration in Europe and Japanese supermarkets remained slow. The company's attempts to crack the drugstore industry and online coupon market were barely profitable. The company runs frequent shopper programs for enough supermarket chains to have the world's largest database of supermarket shopping behavior, 60-million customers, but the original coupon printers remain the bulwark of the business.

Company officials said Granger's resignation was not linked directly to the company's accounting problems. "It was really in response to the current environment in the investment community and what's in the best interest of the company," said Gear.

Some analysts recently suggested Granger step down because his handling of the financial reporting problems cost him credibility _ and cost many shareholders half the value of their shares, which hit a low of $12.01 in June.

"Increasingly, Granger was becoming the target for all the problems," said analyst Lee.

_ Mark Albright can be reached at albrightsptimes.com or (727) 893-8252.

Catalina Marketing: a turbulent year

Dec. 31, 2002 _ The end of the last reporting period for which Catalina Marketing Corp. of St. Petersburg has filed audited financial statements with the SEC.

March 31, 2003 _ The end of Catalina's 2003 fiscal year.

May 5, 2003 _ Catalina announces a new revenue forecasting model for the company's Health Resources unit after the subsidiary's second president in a year resigns.

June 30, 2003 _ Catalina delays filing its annual report and puts off its annual meeting. The company says questions arose over when the company should have recognized certain revenues at the Health Resources unit. The amount in question is said to be about $7-million of the company's $447-million in annual revenue.

July 31, 2003 _ The first of a half-dozen class action shareholder lawsuits is filed, alleging company leaders misled them about the company's fortunes.

Aug. 13, 2003 _ The president and chief operating officer resigns after 16 years with Catalina.

Aug. 20, 2003 _ Ernst & Young, which took over in midyear as independent auditor from the defunct Arthur Andersen LLP, resigns the account. The firm cites its unwillingness to give a "clean" opinion to revenue recognition issues in the 2003 fiscal year without a more comprehensive audit.

Aug. 26, 2003 _ Catalina stock sinks to a five-year low after the auditor's letter, which says revenue recognition issues include the company's core grocery store coupon printer business, is made public.

Oct. 2 2003 _ Catalina hires PricewaterhouseCoopers as its new auditor.

Oct. 24, 2003 _ With auditors still working on fiscal 2003, Catalina delays filing financial results for the second consecutive quarter of fiscal 2004. This is for the quarter that ended Sept. 30.

Oct. 31 _ Chairman and chief executive Dan Granger resigns under pressure.

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