-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, BoWJFquAAxcoYIGxYVjE0/z1xb5wk+ZEwJ4f36ajaJGLvAVVQp8cZcs8VkkQD5P2 sv98ZCIH5ySSW2xZjv1GZg== 0000030419-94-000017.txt : 19940816 0000030419-94-000017.hdr.sgml : 19940816 ACCESSION NUMBER: 0000030419-94-000017 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940630 FILED AS OF DATE: 19940811 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DUN & BRADSTREET CORP CENTRAL INDEX KEY: 0000030419 STANDARD INDUSTRIAL CLASSIFICATION: 8700 IRS NUMBER: 132740040 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07155 FILM NUMBER: 94542844 BUSINESS ADDRESS: STREET 1: 299 PARK AVE 34TH FL CITY: NEW YORK STATE: NY ZIP: 10171 BUSINESS PHONE: 2125936800 MAIL ADDRESS: STREET 1: 299 PARK AVE STREET 2: 34TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10171 FORMER COMPANY: FORMER CONFORMED NAME: DUN & BRADSTREET COMPANIES INC DATE OF NAME CHANGE: 19790429 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 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 June 30, 1994 ------------- OR ( ) 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 1-7155 ------ THE DUN & BRADSTREET CORPORATION (Exact name of registrant as specified in its charter) Delaware 13-2740040 (State of Incorporation) (I.R.S. Employer Identification No.) 200 Nyala Farms, Westport, CT 06880 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (203) 222-4200 ------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 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 the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Shares Outstanding Title of Class at July 29, 1994 -------------- ------------------ Common Stock, par value $1 per share 169,890,985 THE DUN & BRADSTREET CORPORATION INDEX TO FORM 10-Q PART I. FINANCIAL INFORMATION PAGE Item 1. Financial Statements
Condensed Consolidated Statement of Income (Unaudited) Three Months Ended June 30, 1994 and 1993 3 Six Months Ended June 30, 1994 and 1993 4 Condensed Consolidated Statement of Cash Flows (Unaudited) Six Months Ended June 30, 1994 and 1993 5 Condensed Consolidated Statement of Financial Position (Unaudited) June 30, 1994 and December 31, 1993 6 Notes to Condensed Consolidated Financial Statements (Unaudited) 7-11 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11-15 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 16 Item 6. Exhibits and Reports on Form 8-K 16 SIGNATURES 17
PART l. FINANCIAL INFORMATION - - ------------------------------ Item l. FINANCIAL STATEMENTS THE DUN & BRADSTREET CORPORATION Condensed Consolidated Statement of Income (Unaudited) (In thousands except per share amounts)
Three Months Ended June 30 ________________________ 1994 1993 ________________________ Operating Revenue $1,184,703 $1,161,580 Operating Costs, Selling and Administrative Expenses 970,612 969,989 __________ __________ Operating Income 214,091 191,591 Interest (Expense) Income - Net (3,852) 5,442 Other Expense - Net (8,312) (3,248) __________ __________ Non-Operating (Expense) Income - Net (12,164) 2,194 Income Before Provision for Income Taxes 201,927 193,785 Provision for Income Taxes 57,347 55,035 __________ __________ Net Income $144,580 $138,750 ========== ========== Earnings Per Share Of Common Stock $0.85 $0.78 ========== ========== Dividends Paid Per Share of Common Stock $0.65 $0.61 ========== ========== Average Number of Shares Outstanding 170,082 178,286 See accompanying notes to the condensed consolidated financial statements (unaudited). -3-
THE DUN & BRADSTREET CORPORATION Condensed Consolidated Statement of Income (Unaudited) (In thousands except per share amounts)
Six Months Ended June 30 ________________________ 1994 1993 ________________________ Operating Revenue $2,283,928 $2,232,985 Operating Costs, Selling and Administrative Expenses 1,910,018 1,900,906 __________ __________ Operating Income 373,910 332,079 Interest Income - Net 118 11,022 Other Expense - Net (20,271) (2,424) __________ __________ Non-Operating (Expense) Income - Net (20,153) 8,598 Income Before Provision for Taxes and Cumulative Effect of Changes in Accounting Principles 353,757 340,677 Provision for Income Taxes 100,467 96,752 __________ __________ Income Before Cumulative Effect of Changes in Accounting Principles 253,290 243,925 Cumulative Effect to January 1, 1993, of Changes in Accounting Principles: -SFAS No. 106, "Employers' Accounting for Postretirement Benefits," Net of Income Tax Benefits of $93,730 - (140,596) -SFAS No. 112, "Employers' Accounting for Postemployment Benefits," Net of Income Tax Benefits of $150,000 - (250,000) __________ __________ Net Income (Loss) $253,290 $(146,671) ========== ========== Earnings Per Share of Common Stock: Before Cumulative Effect of Changes in Accounting Principles: $1.49 $1.37 -SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" - (0.79) -SFAS No. 112, "Employers' Accounting for Postemployment Benefits" - (1.40) __________ __________ Net Income (Loss) $1.49 $(0.82) ========== ========== Dividends Paid Per Share of Common Stock $1.26 $1.18 ========== ========== Average Number of Shares Outstanding 170,082 178,286 See accompanying notes to the condensed consolidated financial statements (unaudited). -4-
The Dun & Bradstreet Corporation Condensed Consolidated Statement of Cash Flows (Unaudited) Six Months Ended June 30 1994 1993 (Amounts in thousands) _________________________________________________________________________
Cash Flows from Operating Activities: Net Income(Loss) $253,290 $(146,671) Reconciliation of Net Income(Loss) to Net Cash Provided by Operating Activities: Cumulative Effect of Changes in Accounting Principles: Postretirement benefits other than pensions 0 140,596 Postemployment benefits 0 250,000 Depreciation and Amortization 202,597 183,534 Restructuring Gain from Sale of Business (56,327) (13,616) Restructuring Provisions 56,327 13,616 Restructuring Payments (50,108) (41,188) Postemployment Benefit Payments (79,400) 0 Net Decrease in Accounts Receivable 25,102 81,930 Income Taxes Paid- Net of Refunds (104,042) (148,703) Unearned Subscription Income 89,908 97,793 Net Changes in Other Working Capital Items (71,758) 55,519 ___________________________________________________________________________ Net Cash Provided by Operating Activities 265,589 472,810 ___________________________________________________________________________ Cash Flows from Investing Activities: (Payments for)Proceeds from Marketable Securities - Net (99,370) 227 Payments for Acquisition of Businesses (excluding cash and cash equivalents acquired of $1,926 and $6,548 in 1994 and 1993, respectively) (42,749) (98,187) Proceeds from Sale of Businesses 72,648 42,511 Capital Expenditures (134,258) (101,003) Computer Software and Other Intangibles Additions(79,575) (79,161) Increase in Other Investments and Notes Receivable (22,648) (13,599) Other 2,119 10,791 ___________________________________________________________________________ Net Cash Used in Investing Activities (303,833) (238,421) ___________________________________________________________________________ Cash Flows from Financing Activities: Payment of Dividends (214,372) (210,401) Payments for Purchase of Treasury Shares (44,083) (23,745) Net Proceeds from Exercise of Stock Options 10,405 17,304 Increase (Decrease) in Domestic Short-term Borrowings 257,947 (24,010) Payment of Alaska Native Corp. Obligations (166,208) 0 Other 16,497 (4,211) ___________________________________________________________________________ Net Cash Used in Financing Activities (139,814) (245,063) ___________________________________________________________________________ Effect of Exchange Rate Changes on Cash and Cash Equivalents 5,894 (4,278) ___________________________________________________________________________ Decrease in Cash and Cash Equivalents (172,164) (14,952) Cash and Cash Equivalents, Beginning of Period 650,909 494,520 ___________________________________________________________________________ Cash and Cash Equivalents, End of Period $478,745 $479,568 ___________________________________________________________________________ See accompanying notes to the condensed consolidated financial statements (unaudited). -5-
The Dun & Bradstreet Corporation Condensed Consolidated Statement of Financial Position (Unaudited) (Amounts in thousands)
___________________________________________________________________________ June 30 December 31 1994 1993 ___________________________________________________________________________ ASSETS Current Assets Cash and Cash Equivalents $478,745 $650,909 Marketable Securities, interest-bearing 128,190 17,749 Accounts Receivable - Net 1,069,278 1,078,943 Other Current Assets 380,389 374,828 --------- --------- Total Current Assets 2,056,602 2,122,429 ___________________________________________________________________________ Investments Marketable Securities, interest-bearing 122,425 106,219 Other Investments and Notes Receivable 327,229 310,585 --------- --------- Total Investments 449,654 416,804 ___________________________________________________________________________ Property, Plant and Equipment - Net 902,204 861,065 ___________________________________________________________________________ Other Assets-Net Deferred Charges $327,701 $318,469 Computer Software 291,148 294,474 Other Intangibles 216,588 214,743 Goodwill 977,297 942,378 --------- --------- Total Other Assets-Net 1,812,734 1,770,064 ___________________________________________________________________________ TOTAL ASSETS $5,221,194 $5,170,362 ___________________________________________________________________________
Liabilities and Shareowners' Equity Current Liabilities Accounts and Notes Payable $651,542 $371,776 Accrued and Other Current Liabilities 1,273,440 1,561,509 Accrued Income Taxes 111,130 110,759 --------- --------- Total Current Liabilities 2,036,112 2,044,044 ___________________________________________________________________________ Unearned Subscription Income 357,272 263,686 Postretirement and Postemployment Benefits 441,390 545,661 Deferred Income Taxes 84,532 85,850 Other Liabilities and Minority Interests 1,171,891 1,119,805 ___________________________________________________________________________ TOTAL LIABILITIES $4,091,197 $4,059,046 ___________________________________________________________________________ Shareowners' Equity $1,129,997 $1,111,316 ___________________________________________________________________________ TOTAL LIABILITIES AND SHAREOWNERS' EQUITY $5,221,194 $5,170,362 ___________________________________________________________________________ See accompanying notes to the condensed consolidated financial statements (unaudited). -6-
THE DUN & BRADSTREET CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 1 - Interim Consolidated Financial Statements These interim consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and should be read in conjunction with the consolidated financial statements and related notes of The Dun & Bradstreet Corporation (the "Company" or "D&B") 1993 Annual Report on Form 10-K. In the opinion of management, all adjustments (consisting of normal recurring accruals), considered necessary for a fair presentation of financial position, results of operations and cash flows at the dates and for the periods presented have been included. Note 2 - Change in Accounting for Marketable Securities Effective January 1, 1994, the Company adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity Securities." This Statement expands the use of fair value accounting for certain marketable securities and requires additional financial statement disclosures. At January 1, 1994, all marketable securities were classified as "available for sale" and, therefore, are reported at fair value, with net unrealized gains and losses reported in shareowners' equity. Prior to January 1, 1994, marketable securities, consisting principally of fixed income securities, were carried at amortized cost. Adoption of SFAS No. 115 did not have a material effect on the Company's consolidated financial statements. The fair value of current and non-current marketable securities (and interest rate swap agreements and foreign exchange forward contracts discussed in Note 3 below) were estimated based on quoted market prices whenever available. When quoted market prices were not available, the Company used standard pricing models for various types of financial instruments which take into account the present value of estimated future cash flows. Disclosures below include amounts classified in the condensed consolidated statement of financial condition as marketable securities, as well as assets of grantor trusts established to pay benefits for U.S. supplemental pension plans and certain marketable securities included in other investments and notes receivable. Cash equivalents of $102.4 million and $149.2 million at June 30, 1994 and December 31, 1993, respectively, represent marketable securities purchased within 90 days of maturity date, for which book value, including accrued interest, approximates fair value. Cash equivalents have been excluded from these disclosures. -7- A summary of cost (amortized cost of debt instruments) and fair values follows (in millions of dollars): June 30, 1994 December 31, 1993 Fair Fair Cost Value Cost Value ---- ----- ---- ----- Equity securities $25.3 $24.4 $11.6 $11.7 Debt securities of the U.S. Government and its agencies 66.2 65.9 63.2 67.4 Debt securities of states and other sub-divisions of the U.S. Government 96.0 95.8 85.8 89.6 Debt securities of foreign governments 29.8 29.6 9.9 10.3 Corporate debt securities 95.4 95.0 19.6 19.7 Other 10.4 9.1 0.2 0.2 ______ ______ ______ ______ $323.1 $319.8 $190.3 $198.9 ====== ====== ====== ====== At June 30, 1994, gross unrealized gains and losses were $4.3 million and $7.6 million, respectively. At December 31, 1993, gross unrealized gains and losses were $9.1 million and $0.5 million, respectively. At June 30, 1994, cost and fair values of debt securities by contractual maturity were as follows (in millions of dollars): Cost Fair Value ______ __________ Due in one year or less $121.5 $121.5 Due after one year through five years 62.4 62.8 Due after five years through ten years 98.7 96.8 Due after ten years 5.8 6.1 Mortgage-backed securities 7.4 6.5 ______ _______ $295.8 $293.7 ====== ====== For the six months ended June 30, 1994 and 1993, proceeds from the sale of marketable securities and gross realized gains and losses were not material. Note 3 - Financial Instruments with Off-Balance-Sheet Risk and Fair Value of Financial Instruments The Company is a party to financial instruments with off-balance- sheet-risk, which are entered into in the normal course of business to reduce exposure to fluctuations in interest and foreign exchange rates. The counterparties to these instruments are major international financial institutions. The Company is exposed to interest and exchange rate risk in the event of nonperformance by the counterparties to the financial instruments; however, the Company does not anticipate such nonperformance. -8- Interest rate swap agreements are entered into primarily as hedges against variable interest rate exposures. During the first quarter of 1994, the Company entered into swap agreements which effectively fixed interest rates on $300 million of variable rate debt, from 1994 through fiscal 2005. The weighted average fixed rate payable under these agreements is 6.84%. The differential interest to be paid or received under these agreements is included in interest expense over the life of the debt. Foreign exchange forward contracts are entered into to hedge the effects of exchange rate changes on certain of the Company's non-U.S. investments. At June 30, 1994, the Company had approximately $232 million in foreign exchange forward contracts outstanding with various expiration dates through November 1994, which have been designated as hedges of non-U.S. net investments. Gains and losses on these contracts are included in the cumulative translation adjustment component of shareowners' equity. At June 30, 1994, the fair value of the interest rate swaps and foreign exchange forward contracts was $18.2 million and $227 million, respectively. Note 4 - Restructuring Actions In the second quarter, the Company divested two non-strategic businesses--Thomson Directories and the Machinery Information Division of Dataquest--and initiated other actions to restructure certain operations and businesses, and to reduce costs and increase operating efficiencies. These restructuring actions included office consolidations and relocations, the closedown of Sales Technologies' European operations, the discontinuance of certain production and data-collection systems and products, as well as additional steps to complete certain actions initiated in the fourth quarter of 1993. The pre-tax costs associated with these restructuring actions essentially offset a pre-tax gain of $55 million on the two divestitures. Note 5 - Investment Partnerships During 1993, three of the Company's subsidiaries contributed assets and third-party investors contributed cash ($125 million) to a limited partnership. One of the Company's subsidiaries serves as general partner. All of the other partners, including the third-party investors, hold limited partner interests. The partnership, which is a separate and distinct legal entity, is in the business of licensing database assets and computer software. In addition, during 1993, the Company participated in the formation of a limited partnership to invest in various securities including those of the Company. One of the Company's subsidiaries serves as managing general partner. Third-party investors hold limited partner and special investors interests totaling $500 million. The special investors are entitled to a specified return on their investments. Funds raised by the partnership provided a source of the financing for the Company's repurchase in 1993 of 8.3 million shares of its common stock. For financial reporting purposes, the assets, liabilities, results of operations and cash flow of the partnerships described above are included in the Company's consolidated financial statements. The third-parties investments in these partnerships at June 30, 1994 and December 31, 1993 totaled approximately $625 million, and are reflected in other liabilities and minority interests. Third- parties share of partnerships results of operations, including specified returns, is reflected in other income and expense-net. -9- Note 6 - Litigation The Company and its subsidiaries are involved in legal proceedings, claims and litigation arising in the ordinary course of business. In addition, in March and April 1989, five purported class actions were commenced by certain shareowners (the "Shareowner Class Actions") against the Company and up to three members of its Board of Directors (two of whom are also officers) in various United States District Courts, each alleging violations of the federal securities laws and seeking unspecified damages arising out of an asserted failure to make public disclosure of information relating to allegedly improper practices (the "alleged practices") of the Company's wholly owned subsidiary, Dun & Bradstreet, Inc., in connection with the selling of commercial-credit information services. The Shareowner Class Actions were later consolidated in the United States District Court for the Southern District of New York. In February 1990, an amended consolidated Shareowner Class Action complaint was served on the defendants, alleging additional violations of the securities laws arising out of an asserted failure to make public disclosure of the effect that the alleged practices would have on the Company's future sales and income, and in September 1992, the District Judge granted a motion to permit this Action to be maintained as a class action. On April 16, 1993, attorneys for the defendants and attorneys for the plaintiffs entered into a memorandum of intent to settle the Shareowner Class Action for an amount between $15 million and $20 million. On January 14, 1994, a judgment was entered by the Court approving the proposed settlement. The exact amount of the settlement will depend on the monetary amount of claims filed by shareowners who are part of the class. As a result of contribution to the settlement by the Company's insurance carrier and provisions previously recorded by the Company, the amount of the settlement did not materially affect the Company's earnings. On June 9, 1993, American Credit Indemnity ("ACI"), a company of which the Company owns 95% of the outstanding common stock, received a summons and a consolidated amended class action complaint (the "Amended Complaint") in a purported class action pending in the United States District Court for the Southern District of New York captioned "In re Towers Financial Corporation Noteholders Litigation. " The Amended Complaint names 17 defendants, including Towers Financial Corporation ("Towers") and various subsidiaries and controlling persons of Towers, as well as ACI, in addition to a "Broker-Dealer Defendant Class," alleged to consist of more than 75 members. The Amended Complaint is brought by an alleged class of persons who bought promissory notes issued by Towers between February 15, 1989 and February 9, 1993. It alleges that Towers, now operating under Chapter 11 of the Bankruptcy Code, sold nearly $215 million of such notes to more than 2,800 investors and seeks damages from all the defendants in at least that amount, as well as punitive damages. The claims against ACI assert negligent misrepresentation, negligence and fraud under common law and violations of Section 10(b) (and Rule 10b-5 thereunder) of the Securities Exchange Act of 1934. The Amended Complaint alleges that offering documents for the notes -10- mischaracterized insurance policies issued by ACI to Towers with respect to accounts receivable securing or backing the notes. It further alleges that ACI issued policies with limited scope of coverage and for exorbitant premiums with knowledge that they would be used by Towers to fraudulently market the notes. ACI answered the Amended Complaint, denying its material terms, and moved for judgment on the pleadings. While ACI's motion was pending, the Supreme Court of the United States decided the case of Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A., holding that a private plaintiff may not maintain an aiding and abetting suit under Section 10(b) of the Exchange Act. Thereafter, plaintiffs filed a Second Consolidated Amended Class Action Complaint, in which they seek to assert a primary liability claim against ACI and others under the Exchange Act, and certain common law claims. ACI has moved to dismiss this latest Complaint. ACI intends to defend vigorously against the claims asserted against it. In the opinion of management, the outcome of all current proceedings, claims and litigation could have a material effect on quarterly or annual operating results when resolved in a future period. However, in the opinion of management, these matters will not materially affect the Company's consolidated financial position. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Earnings per share in the second quarter were $.85, up 9.0 percent from $.78 per share a year ago. For the first six months of 1994, the Company reported earnings per share of $1.49, up 8.8% from $1.37 per share in the first six months of 1993, which excludes the cumulative effect of accounting changes adopted in the first quarter of 1993. Including the impact of SFAS Nos. 106 and 112, last year the Company reported a loss in first-half earnings of $.82 per share. Net income in the second quarter grew 4.2% to $144.6 million from $138.8 million a year ago. First-half net income increased 3.8% to $253.3 million from $243.9 million in the first half of 1993 (excluding the impact of SFAS Nos. 106 and 112). Growth in net income was held down by the cost of funds that the Company used to repurchase 8.3 million shares of its common stock in the fourth quarter of 1993. Due to the repurchase, which resulted in a lower number of average shares outstanding, growth in earnings per share was greater than the increase in net income. Reported operating income in the second quarter increased 11.7% to $214.1 million from $191.6 million a year ago, driven primarily by workforce reductions, restructuring actions and other company-wide productivity initiatives. The Company's operating income grew by about 8%, excluding the effects of acquisitions, divestitures, a stronger dollar and timing factors. Reported operating income in the first six months increased 12.6% to $373.9 million from $332.1 million, driven primarily by workforce reductions and restructuring actions throughout the Company. First-half operating income for D&B's current portfolio of businesses increased by about 11%, excluding the effects of acquisitions, divestitures, a stronger dollar and timing factors. The productivity actions being taken generated double-digit underlying growth in the Company's operating income for the first half of 1994, and the Company expects full-year growth to be in the same range. -11- Reported second-quarter revenue increased 2.0% to $1,184.7 million from $1,161.6 million a year ago. Excluding the effects of acquisitions, divestitures, a stronger dollar and timing factors, second-quarter revenue rose by about 1%. Growth for the quarter was affected primarily by a decrease in mainframe-related revenue at Dun & Bradstreet Software (DBS) and by past competitive losses at Nielsen in the U.S. In the first six months of 1994, reported operating revenue increased 2.3% to $2,283.9 million from a $2,233.0 million a year ago. Excluding the effects of the factors noted above, first-half revenue for D&B's current portfolio of businesses was up about 1%. The Company is aggressively implementing company-wide actions to accelerate future revenue growth. For example, DBS introduced three new client/server products during the second quarter and will complete its client/server suite of products by launching ManufacturingStream and DistributionStream this fall. D&B Information Services is now rolling out several new products, including WorldBase, which offers basic information on 35 million companies worldwide. IMS introduced Xplorer, an open client/server system that provides powerful decision-support applications for IMS's massive prescriber and managed-care databases. Top line growth also will be fueled by acquisitions, joint ventures and geographic expansion. Nielsen substantially strengthened its global competitive advantage by agreeing to acquire Survey Research Group, the fast-growing leader in market research in Asia. In the U.S., Nielsen recently agreed to form a joint venture with Market Decisions to broaden its range of services to packaged goods companies. Moody's opened a new office in Hong Kong. And building on the acquisition of Soliditet and Novinform AG, D&B Information Services acquired S&W, a French credit information company, and formed a significant new strategic alliance with Tokyo Shoko Research Ltd., a leading credit reporting firm in Japan. Investment in new technologies, such as Nielsen Solution System, is another revenue-growth driver. A recent key technology move is the Company's agreement to acquire Pilot Software, a leader in the accelerating market for on-line processing (OLAP) software. Interest expense--net in the second quarter was $3.9 million compared with interest income--net of $5.4 million a year ago, due in part to interest expense on debt in hyperinflationary countries, which was largely offset by foreign exchange gains reported in other expense - - --net. Net interest expense also resulted from higher interest rates paid on increased U.S. short-term borrowings and lower interest rates earned on international cash investments. First half interest income-net of $118,000 compared with interest income-net of $11.0 million a year ago, primarily as a result of interest expense on debt in hyperinflationary countries and the other factors noted above. Other expense--net in the second quarter was $8.3 million, compared with other expense--net of $3.2 million a year ago. Other expense - - --net in the second quarter of 1994 included minority interest expense, related to two limited partnerships and Gartner Group, and the favorable impact of foreign exchange gains. The cost of funds raised by one partnership, which provided funding for the Company's share repurchase program, was offset by the favorable impact on earnings per share of lower average shares outstanding. Other expense--net in the first half was $20.3 million compared with other expense--net of $2.4 million a year ago. Other expense--net in the first half of 1994 included minority interest expense related to two limited partnerships and Gartner Group. -12- The Company's tax rate for the first-half was 28.4%, unchanged from a year ago. Business Segment Highlights Second-quarter operating results were highlighted by good underlying revenue growth at IMS International, and strong revenue performances at both Nielsen Media Research and Gartner Group. Directory Information Services, which posted flat underlying revenue last year, has successfully reversed a flat-to-declining trend by achieving mid- single-digit underlying revenue growth in the first half of 1994. Marketing Information Services reported a 2.6% increase in second- quarter revenue to $483.8 million from $471.5 million year ago. Excluding the impact of the stronger dollar and the divestiture of Donnelley Marketing Information Services (DMIS), second-quarter revenue growth for the segment was about 4%. IMS International reported second-quarter revenue of $166 million, up 7.7% on a reported basis and up about 8% excluding the impact of a stronger dollar. Nielsen Marketing Research reported second-quarter revenue of $257 million, down 4.1% on a reported basis and essentially unchanged excluding the impact of a stronger dollar and the divestiture of DMIS. Nielsen Marketing Research's second-quarter revenue growth was held down by past competitive losses in the U.S. While the competitive environment in the U.S. remains intense, Nielsen recently renewed significant contracts with Helene Curtis, Coors, Maybelline, Revlon, Welch Foods Inc., Whitehall/Robins and Procter & Gamble. Nielsen Media Research had a strong increase in second-quarter revenue. Risk Management and Business Marketing Information Services reported second-quarter revenue growth of 2.3% to $392.0 million from $383.0 million a year ago. Excluding the impact of a stronger dollar and the acquisition of Soliditet and Novinform AG, segment revenue was essentially unchanged. DBIS North America's second-quarter revenue also was flat. U.S. credit services revenue, which includes the recognition of revenue from previous subscription sales, was down slightly, reflecting customers' increased use of lower priced, less comprehensive U.S. credit services products. Second-quarter sales of U.S. credit services were up slightly. Excluding the impact of a stronger dollar and the acquisition of Soliditet and Novinform AG, DBIS Europe's second-quarter revenue declined slightly. DBIS recently introduced a number of new products aimed at stimulating revenue growth, including: new database marketing services on CD/ROM; a new low-cost product for the high-transaction trucking industry; a new small-business scoring report in conjunction with Equifax; and a new low-cost trade-based payment analysis report. Moody's Investors Service's second-quarter revenue was essentially unchanged as a result of the slowdown in the volume of refinancings and new debt issues. Software Services reported a 17.3% decrease in second-quarter revenue to $99.1 million from $119.9 million a year ago. DBS's second-quarter 1994 revenue, adjusted for the dollar, was down in line with the segment, due to lower mainframe-related revenue. During the second quarter, DBS introduced three new client/server products: SmartPath, a tool set for automating migration from mainframe applications to the Company's SmartStream suite of client/server solutions; SmartStream Budget, a client/server budgeting and planning application; and TotalHR, a human resources application for the PC/LAN environment. While the sales cycle is longer than expected due to the scope of shifting to enterprise-wide client/server solutions, customer interest in DBS's client/server products is high and sales are ahead of last year. -13- Directory Information Services reported a 2.2% increase in second- quarter revenue to $103.2 million from $101.0 million a year ago. Excluding the impact of timing and the divestiture of Thomson Directories, revenue growth for the quarter was about 5%. Underlying second-quarter sales growth of Directory Information Services yellow pages directories was up in the same range as revenue growth, reflecting the continuation of the improved sales performance that began in the first quarter. Other Business Services reported second-quarter revenue of $106.6 million up 23.8% from $86.1 million a year ago. Adjusted for the acquisition of Gartner Group and Dataquest's divestiture of its Machinery Information Division, segment revenue increased about 12%. Gartner Group reported an excellent increase in second-quarter revenue, consistent with the strong expectations for this business when it was acquired by D&B last year. NCH Promotional Services reported a significant decrease in second-quarter revenue, reflecting a decline in worldwide coupon redemptions and competitive pricing in the industry as well as the impact of actions taken to improve cash flow and profitability. Changes in Financial Condition at June 30, 1994 Compared with December 31, 1993 Accounts and Notes Payable increased to $651.5 million at June 30, 1994 from $371.8 million at December 31, 1993, primarily reflecting increased domestic short-term borrowings ($258.0 million). Accrued and Other Current Liabilities decreased to $1,273.4 million at June 30, 1994 from $1,561.5 million at December 31, 1993, primarily reflecting the payment ($166.2 million) of the Company's obligation to an Alaska Native Corporation, postemployment benefit payments ($79.4 million), restructuring payments ($50.1 million), partially offset by the reclassification of accrued postemployment benefits of $100.0 million to accrued and other current liabilities (see postretirement and postemployment benefits below). Unearned Subscription Income increased to $357.3 million at June 30, 1994, from $263.7 million at December 31, 1993, reflecting the cyclical pattern of higher subscription sales in the first quarter. Postretirement and Postemployment Benefits decreased to $441.4 million at June 30, 1994 from $545.7 million at December 31, 1993, primarily reflecting the reclassification to accrued and other current liabilities of $100.0 million of accrued postemployment benefits (primarily severance). Condensed Consolidated Statement of Cash Flows Six months Ended June 30, 1994 and 1993 Net cash provided by operating activities for the six months ended June 30, 1994 totaled $265.6 million compared with $472.8 million for the comparable period during 1993. The decrease in cash provided by operating activities ($207.2 million) primarily reflected an increase ($127.3 million) in other working capital items at American Credit Indemnity, NCH Promotional Services (NCH) and R.H. Donnelley, lower deferred revenue at D&B Software, a smaller reduction in accounts receivable at NCH and higher postemployment benefit payments ($79.4 million), partially offset by lower income taxes paid-net of refunds ($44.7 million). -14- Net cash used in investing activities for the six months ended June 30,1994 totaled $303.8 million compared with $238.4 million for the comparable period in 1993. The increase in cash used for investing activities primarily reflected higher payments for marketable securities ($99.6 million) and higher capital expenditures ($33.3 million) offset, in part, by higher proceeds from sale of businesses ($30.1 million) and lower payments for acquisition of businesses ($55.4 million). Net cash used in financing activities was $139.8 million for the six months ended June 30, 1994 compared with net cash used in financing activities of $245.1 million for the comparable period in 1993. The decrease in cash usage primarily reflected increased domestic short term borrowings of $282.0 million, partially offset by the payment of Alaska Native Corp. obligations of $166.2 million. Restructuring Actions During the second quarter, the Company took further steps to improve productivity. The Company divested two non-strategic businesses-- Thomson Directories and the Machinery Information Division of Dataquest--and initiated other actions to restructure certain operations and businesses, and to reduce costs and increase operating efficiencies. These restructuring actions included office consolidations and relocations, the closedown of Sales Technologies' European operations, the discontinuance of certain production and data-collection systems and products, as well as additional steps to complete certain actions initiated in the fourth quarter of 1993. The pre-tax costs associated with these restructuring actions essentially offset a pre-tax gain of $55 million on the two divestitures. The ongoing pre-tax savings from these actions and the synergy actions that were initiated in the fourth quarter of 1993 are expected to grow in the next few years to more than $100 million annually. In 1994, the Company anticipates cash outlays in the range of $170 million primarily associated with restructuring actions initiated in 1994 and 1993. Other Looking ahead, the Company reiterated it is anticipating growth in earnings per share somewhat above the 8.4% growth in 1993. (For the full year 1993, earnings per share rose 8.4% to $3.36, excluding the impact of a fourth-quarter restructuring charge and the adoption of required accounting changes.) While revenue growth is expected to improve in the second half of this year, underlying revenue growth for the full year is likely to be less than 1993 revenue growth of about 3.5%, primarily because of the decline in revenue at DBS and competitive pressures at Nielsen in the U.S. The Board of Directors declared on July 20, 1994 a quarterly dividend of 65 cents per share, payable September 9, 1994, to shareowners of record at the close of business August 19, 1994. -15- PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders The Annual Meeting of Shareowners of The Dun & Bradstreet Corporation was held on April 19, 1994. The following nominees for director named in the Proxy Statement dated March 11, 1994 were elected at the Meeting by the votes indicated: For Withheld ----------- -------- Hall Adams, Jr. 137,410,238 980,795 Michael R. Quinlan 137,418,144 972,889 Robert E. Weissman 137,431,118 959,915 The votes in favor of the election of the nominees represent at least 99.3% of the shares voted for each of the nominees. Ratification of the appointment of Independent Public Accountants was approved by the following vote: For Against Abstain --- ------- ------- Number of shares 137,968,652 198,420 223,961 The proposal on implementation of the Macbride principles was defeated by the following vote: For Against Abstain No Votes --- ------- ------- -------- Number of shares 18,990,592 99,406,797 9,066,300 10,927,344 Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. None (b) Reports on Form 8-K. None -16- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE DUN & BRADSTREET CORPORATION Date: August 11, 1994 By:EDWIN A. BESCHERER, JR. __________________________ Edwin A. Bescherer, Jr., Executive Vice President - Finance and Chief Financial Officer Date: August 11, 1994 By:THOMAS W. YOUNG __________________ Thomas W. Young, Senior Vice President and Controller -17- -----END PRIVACY-ENHANCED MESSAGE-----