-----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, N6TWkFBx3yVp2WKTqK//na/CugC4OitgdS5kAhehfgWuDXOAlkzBs2DRuF6jVjME Qeol11CUsIzUJp388LOhaQ== 0000030419-94-000023.txt : 19941122 0000030419-94-000023.hdr.sgml : 19941122 ACCESSION NUMBER: 0000030419-94-000023 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940930 FILED AS OF DATE: 19941110 SROS: NYSE 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: 94558599 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 September 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 October 31, 1994 -------------- ------------------- Common Stock, ar value $1 per share 169,788,332 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 September 30, 1994 and 1993 3 Nine Months Ended September 30, 1994 and 1993 4 Condensed Consolidated Statement of Cash Flows (Unaudited) Nine Months Ended September 30, 1994 and 1993 5 Condensed Consolidated Statement of Financial Position (Unaudited) September 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 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 September 30 ________________________ 1994 1993 ________________________ Operating Revenue $1,203,362 $1,157,953 Operating Costs, Selling and Administrative Expenses 953,008 929,189 __________ __________ Operating Income 250,354 228,764 Interest (Expense) Income - Net (4,250) 4,433 Other Expense - Net (13,311) (1,388) __________ __________ Non-Operating (Expense) Income - Net (17,561) 3,045 Income Before Provision for Income Taxes 232,793 231,809 Provision for Income Taxes 66,113 73,260 __________ __________ Net Income $166,680 $158,549 ========== ========== Earnings Per Share Of Common Stock $0.98 $0.89 ========== ========== Dividends Paid Per Share of Common Stock $0.65 $0.61 ========== ========== Average Number of Shares Outstanding 170,004 178,288 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)
Nine Months Ended September 30 ________________________ 1994 1993 ________________________ Operating Revenue $3,487,290 $3,390,938 Operating Costs, Selling and Administrative Expenses 2,863,026 2,830,095 __________ __________ Operating Income 624,264 560,843 Interest (Expense) Income - Net (4,132) 15,455 Other Expense - Net (33,582) (3,812) __________ __________ Non-Operating (Expense) Income - Net (37,714) 11,643 Income Before Provision for Taxes and Cumulative Effect of Changes in Accounting Principles 586,550 572,486 Provision for Income Taxes 166,580 170,012 __________ __________ Income Before Cumulative Effect of Changes in Accounting Principles 419,970 402,474 Cumulative Effect to January 1, 1993, of Changes in Accounting Principles: -SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," 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 $419,970 $ 11,878 ========== ========== Earnings Per Share of Common Stock: Before Cumulative Effect of Changes in Accounting Principles $2.47 $2.26 -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 $2.47 $ 0.07 ========== ========== Dividends Paid Per Share of Common Stock $1.91 $1.79 ========== ========== Average Number of Shares Outstanding 170,004 178,288 See accompanying notes to the condensed consolidated financial statements (unaudited). -4-
The Dun & Bradstreet Corporation Condensed Consolidated Statement of Cash Flows (Unaudited) Nine Months Ended September 30 1994 1993 (Amounts in thousands) _________________________________________________________________________
Cash Flows from Operating Activities: Net Income $419,970 $ 11,878 Reconciliation of Net Income 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 309,028 278,033 Gain on Sale of DunsNet Assets (36,000) 0 Revaluation of Computer Software and Other Assets 38,800 0 Restructuring Gains from Sale of Businesses (56,327) (13,616) Restructuring Provisions 56,327 13,616 Restructuring Payments (109,563) (51,884) Postemployment Benefit Payments (124,521) 0 Net Decrease in Accounts Receivable 74,990 169,090 Income Taxes Paid- Net of Refunds (139,667) (190,293) Unearned Subscription Income 55,561 61,548 Postemployment Benefits - Curtailment Gains (33,410) 0 Net Changes in Other Working Capital Items (31,938) 6,125 ___________________________________________________________________________ Net Cash Provided by Operating Activities 423,250 675,093 ___________________________________________________________________________ Cash Flows from Investing Activities: (Payments for)Proceeds from Marketable Securities - Net (10,135) 16,064 Payments for Acquisition of Businesses (excluding cash and cash equivalents acquired of $1,926 and $6,548 in 1994 and 1993, respectively) (181,910) (100,787) Proceeds from Sale of Businesses 143,648 42,511 Capital Expenditures (213,706) (158,924) Additions to Computer Software and Other Intangibles (128,561) (134,808) Increase in Other Investments and Notes Receivable (46,791) (31,919) Other 6,323 14,486 ___________________________________________________________________________ Net Cash Used in Investing Activities (431,132) (353,377) ___________________________________________________________________________ Cash Flows from Financing Activities: Payment of Dividends (324,804) (319,143) Payments for Purchase of Treasury Shares (59,887) (37,464) Net Proceeds from Exercise of Stock Options 19,378 28,053 Increase (Decrease) in U.S. Short-term Borrowings 363,017 (81,850) Third Parties' Investment in Partnership 0 125,000 Payment of Alaska Native Corp. Obligations (166,208) 0 Other 30,442 (7,797) ___________________________________________________________________________ Net Cash Used in Financing Activities (138,062) (293,201) ___________________________________________________________________________ Effect of Exchange Rate Changes on Cash and Cash Equivalents 13,951 (19,878) ___________________________________________________________________________ (Decrease) Increase in Cash and Cash Equivalents(131,993) 8,637 Cash and Cash Equivalents, Beginning of Period 650,909 494,520 ___________________________________________________________________________ Cash and Cash Equivalents, End of Period $518,916 $503,157 ___________________________________________________________________________ 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)
___________________________________________________________________________ September 30 December 31 1994 1993 ___________________________________________________________________________ ASSETS Current Assets Cash and Cash Equivalents $518,916 $650,909 Marketable Securities, interest-bearing 31,719 17,749 Accounts Receivable - Net 1,049,083 1,078,943 Other Current Assets 386,367 374,828 --------- --------- Total Current Assets 1,986,085 2,122,429 ___________________________________________________________________________ Investments Marketable Securities, interest-bearing 122,495 106,219 Other Investments and Notes Receivable 356,010 310,585 --------- --------- Total Investments 478,505 416,804 ___________________________________________________________________________ Property, Plant and Equipment - Net 911,647 861,065 ___________________________________________________________________________ Other Assets-Net Deferred Charges $347,948 $318,469 Computer Software 275,187 294,474 Other Intangibles 214,215 214,743 Goodwill 1,091,701 942,378 --------- --------- Total Other Assets-Net 1,929,051 1,770,064 ___________________________________________________________________________ TOTAL ASSETS $5,305,288 $5,170,362 ___________________________________________________________________________
Liabilities and Shareowners' Equity Current Liabilities Accounts and Notes Payable $750,290 $371,776 Accrued and Other Current Liabilities 1,192,442 1,561,509 Accrued Income Taxes 145,428 110,759 --------- --------- Total Current Liabilities 2,088,160 2,044,044 ___________________________________________________________________________ Unearned Subscription Income 325,029 263,686 Postretirement and Postemployment Benefits 442,807 545,661 Deferred Income Taxes 84,642 85,850 Other Liabilities and Minority Interests 1,157,080 1,119,805 ___________________________________________________________________________ TOTAL LIABILITIES $4,097,718 $4,059,046 ___________________________________________________________________________ Shareowners' Equity $1,207,570 $1,111,316 ___________________________________________________________________________ TOTAL LIABILITIES AND SHAREOWNERS' EQUITY $5,305,288 $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 position 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 $107.1 million and $149.2 million at September 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): September 30, 1994 December 31, 1993 Cost Fair Value Cost Fair Value ---- ---------- ---- ---------- Equity securities $25.7 $25.6 $11.6 $11.7 Debt securities of the U.S. Government and its agencies 71.5 70.2 63.2 67.4 Debt securities of states and other sub-divisions of the U.S. Government 90.8 90.4 85.8 89.6 Debt securities of non-U.S.governments 11.7 11.5 9.9 10.3 Corporate debt securities 17.6 16.1 19.6 19.7 Other 3.1 2.9 0.2 0.2 ---- ---- ---- ---- $220.3 $216.7 $190.3 $198.9 ====== ====== ====== ====== At September 30, 1994, gross unrealized gains and losses were $3.9 million and $7.5 million, respectively. At December 31, 1993, gross unrealized gains and losses were $9.1 million and $0.5 million, respectively. At September 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 $20.5 $19.2 Due after one year through five years 65.3 64.3 Due after five years through ten years 97.9 96.9 Mortgage-backed securities 7.9 7.8 ------ ------ $191.6 $188.2 ====== ====== For the nine months ended September 30, 1994 and 1993, proceeds from the sales and maturities of marketable securities were $123.7 million and $57.4 million, respectively 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 September 30, 1994, the Company had approximately $130 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 September 30, 1994, the fair value of the interest rate swaps and foreign exchange forward contracts was $21.1 million and $131 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 September 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 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 -10- 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. On September 2, 1994, ACI and counsel for the plaintiffs entered into an agreement to settle all claims that were or could have been asserted against ACI in the Towers Class Action for $1.25 million. The proposed settlement is subject to United States District Court approval. The amount of the proposed settlement will not materially affect the Company's 1994 earnings. 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 third quarter were $.98, up 10.1% from $.89 per share a year ago. For the first nine months of 1994, the Company reported earnings per share of $2.47, up 9.3% from $2.26 per share in the first nine 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 earnings in the first nine months of $.07 per share. Net income in the third quarter grew 5.1% to $166.7 million from $158.5 million a year ago. Net income for the first nine months increased 4.3% to $419.9 million from $402.5 million in the first nine months 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. As a result of the Company's emphasis on productivity, reported operating income in the third quarter increased 9.4% to $250.4 million from $228.8 million a year ago. Operating-income growth outpaced revenue growth primarily because of workforce reductions, prior restructuring actions and other company-wide productivity initiatives, including a substantial reduction in healthcare costs for U.S. employees. Several non-recurring gains and significant changes in costs were included in the third quarter. As a result of the decision to outsource communications services, the assets of DunsNet were sold for a pre-tax gain of $36 million. Dun & Bradstreet Plan Services was divested with no gain recorded. The Company also took proactive measures to improve D&B's future performance by accelerating the introduction of newer technologies, though this resulted in a charge of $39 million. The charge principally reflected the revaluation of certain computer software and other intangible assets that will be replaced or no longer be used at Dun & Bradstreet Software (DBS), IMS International (IMS), Dun & Bradstreet Information Services (DBIS), and Nielsen. In -11- addition, a change in eligibility requirements for the Company's postretirement medical plan resulted in a curtailment gain of approximately $26 million, which was largely offset by a substantial increase in spending for new-product development. Excluding these factors, as well as the effects of acquisitions, divestitures, a weaker U.S. dollar and timing issues, D&B's third-quarter operating income grew by about 9%. Reported operating income in the first nine months increased 11.3% to $624.3 million from $560.8 million, driven primarily by workforce reductions and restructuring actions throughout the Company. Nine-month operating income for D&B's current portfolio of businesses increased by about 11%, excluding the effects of acquisitions, divestitures, a stronger dollar, timing factors and the other items noted above. The Company is continuing to focus on long-term revenue growth and ongoing productivity improvement. Productivity actions clearly showed an impact on third-quarter results and the Company is working aggressively to improve the revenue outlook. At DBIS and DBS, actions have been taken to build new management structures and teams to drive the top line. Key changes in top management at DBIS North America and Europe followed the appointment at DBS of a new president with strong sales and marketing skills. Third-quarter revenue increased 3.9% to $1,203.4 million from $1,157.9 million a year ago. Excluding the effects of acquisitions and divestitures, a weaker U.S. dollar and timing factors, third- quarter revenue rose by about 1%. Good underlyling revenue performance at IMS International, Nielsen Media Research, Gartner Group and Directory Information Services was largely offset by a decline at Moody's Investors Service, a decrease in mainframe- related revenue at DBS, and by past competitive losses at Nielsen in the U.S. During the third quarter, the Company continued to invest in a broad range of new initiatives to accelerate revenue growth. In the first nine months of 1994, reported operating revenue increased 2.8% to $3,487.3 million from $3,390.9 million a year ago. Excluding the effects of acquisitions, divestitures, a stronger dollar and timing factors, nine-month revenue for D&B's current portfolio of businesses was up about 1%. Interest expense-net in the third quarter was $4.2 million, compared with interest income--net of $4.4 million a year ago, due in part to a lower cash position as a result of cash payments for acquisitions, and lower interest rates earned on international cash investments. Net interest expense also resulted from interest expense on debt in hyperinflationary countries, which was partly offset by foreign- exchange gains reported in other expense--net, and higher interest rates paid on increased U.S. short-term borrowings. For the first nine months of 1994, the Company reported interest expense--net of $4.1 million, compared with interest income--net of $15.5 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 third quarter was $13.3 million, compared with other expense--net of $1.4 million a year ago. Other expense-- net in the first nine months was $33.6 million compared with other expense--net of $3.8 million a year ago. Other expense--net in the third quarter and first nine months of 1994 included minority interest expense related to two previously disclosed limited partnerships and to Gartner Group. 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. -12- The Company's third-quarter tax rate was 28.4%, compared with the third-quarter 1993 tax rate of 31.6% (which reflected the increase in the U.S. corporate income-tax rate, retroactive to January 1, 1993). Business Segment Highlights Third-quarter operating results were highlighted by excellent revenue performances at both Nielsen Media Research and Gartner Group, and solid underlying revenue growth at IMS International. Directory Information Services achieved underlying revenue growth of about 7% in the third quarter, continuing a successful reversal of a flat-to- declining trend over the past few years. Marketing Information Services reported a 9.9% increase in third- quarter revenue to $513.5 million from $467.2 million a year ago. Excluding the impact of a weaker U.S. dollar, the acquisition of Survey Research Group (SRG), AGB Australia and Amfac Chemdata and the divestiture of Donnelley Marketing Information Services (DMIS), third-quarter revenue growth for the segment was up about 4%. IMS International reported third-quarter revenue of $174 million, up 11.4% on a reported basis and up about 8%, excluding the acquisition of Amfac Chemdata and the impact of the dollar. Nielsen Marketing Research reported third-quarter revenue of $277 million, up 6.3% on a reported basis and essentially unchanged excluding the impact of a weaker U.S. dollar, the acquisition of SRG and AGB Australia and the divestiture of DMIS. Nielsen Marketing Research's underlying third- quarter revenue was held down by past competitive losses in the U.S. Nielsen Marketing Research's multi-year contracts result in a six month to a year lag in impact on reported revenue. Therefore, business lost in 1993 is now adversely impacting 1994 results. However, this timing also holds true for 1994 competitive wins, which will be reflected next year. While the competitive environment in the U.S. remained intense, in the third quarter Tambrands and Dole Foods joined a growing number of clients, such as Bristol Myers Squibb, Johnson & Johnson, Clairol and Colgate Palmolive, that have reestablished and/or consolidated their information needs with Nielsen. During the past year, more than 20 clients have been won back from competition, underscoring Nielsen's growing momentum, particularly in the U.S. marketplace. Nielsen Media Research had a substantial increase in third-quarter revenue, reflecting growth in both cable and broadcast audience measurement. Risk Management and Business Marketing Information Services reported third-quarter revenue growth of 0.9% to $391.3 million from $387.8 million a year ago. Excluding the impact of a weaker U.S. dollar and the acquisition of Novinform AG, segment revenue was essentially unchanged, held down by a decline at Moody's Investors Service. Moody's reported significantly lower third-quarter revenue, principally due to the dramatic decline in corporate-bond volumes and public-debt refundings. Dun & Bradstreet Information Services (DBIS) reported revenue of $313 million, up 4.6% from last year. Excluding the weaker U.S. dollar and the acquisition of Novinform, DBIS's revenue was up about 3%. DBIS North America's third-quarter revenue was up slightly, held down by flat U.S. credit services revenue resulting from customers' increased use of lower priced, less comprehensive U.S. credit services products. Excluding the impact of a weaker U.S. dollar and the acquisition, DBIS Europe's third-quarter revenue increased by about 5%, driven by new products and accelerated actions to strengthen D&B's competitive capabilities throughout Europe. -13- Software Services reported a 13.4% decrease in third-quarter revenue to $94.0 million from $108.6 million a year ago. DBS's third-quarter 1994 revenue, adjusted for the dollar, was down in line with the segment, due to lower mainframe-related revenue. Directory Information Services reported a 2.3% increase in third- quarter revenue to $101.8 million from $99.5 million a year ago. Excluding the impact of timing, revenue growth for the quarter was about 7%. Underlying third-quarter sales of Directory Information Services yellow pages directories were down slightly. Other Business Services reported third-quarter revenue of $102.9 million, up 8.4% from $94.9 million a year ago. Adjusted for Dataquest's divestiture of its Machinery Information Division and the divestiture of Plan Services, segment revenue increased about 19%. Gartner Group reported an excellent increase in third-quarter revenue, consistent with the strong expectations for this business when it was acquired by D&B last year. NCH Promotional Services reported a decrease in third-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 Position at September 30, 1994 Compared with December 31, 1993 Goodwill - Net increased to $1,091.7 million at September 30, 1994 from $942.4 million at December 31, 1993 reflecting goodwill arising from the Company's acquisitions during 1994 of SRG, AGB Australia, Amfac Chemdata, Novinform AG and S&W Wys Muller. Accounts and Notes Payable increased to $750.3 million at September 30, 1994 from $371.8 million at December 31, 1993, primarily reflecting increased U.S. short-term borrowings ($363.0 million). Accrued and Other Current Liabilities decreased to $1,192.4 million at September 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 ($124.5 million) and restructuring payments ($109.6 million), partially offset by the reclassification of accrued postretirement benefits of $100.0 million to accrued and other current liabilities (see postretirement and postemployment benefits below). Postretirement and Postemployment Benefits decreased to $442.8 million at September 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 Nine months Ended September 30, 1994 and 1993 Net cash provided by operating activities for the nine months ended September 30, 1994 totaled $423.3 million compared with $675.1 million for the comparable period during 1993. The decrease in cash provided by operating activities ($251.8 million) primarily reflected a smaller reduction in accounts receivable at NCH ($90.4 million), higher restructuring payments ($57.7 million), higher postemployment benefit payments ($124.5 million) and the postemployment benefits curtailment gains ($33.4 million) partially offset by lower income taxes paid-net of refunds ($50.6 million). -14- Net cash used in investing activities for the nine months ended September 30, 1994 totaled $431.1 million compared with $353.4 million for the comparable period in 1993. The increase in cash used for investing activities primarily reflected higher payments for marketable securities-net ($26.2 million), higher payments for acquisition of businesses ($81.1 million) and higher capital expenditures ($54.8 million), offset in part, by higher proceeds from sale of businesses ($101.1 million). Net cash used in financing activities was $138.1 million for the nine months ended September 30, 1994 compared with net cash used in financing activities of $293.2 million for the comparable period in 1993. The decrease in cash usage primarily reflected the change in U.S. short-term borrowings ($444.8 million), partially offset by the payment of Alaska Native Corporation obligations ($166.2 million) and the absence of third parties' investments in a limited partnership ($125.0 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 The Company reiterated it is anticipating growth in full-year earnings per share in 1994 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.) Underlying revenue growth for the full year is expected to be in the range of 1-to-2%. The Board of Directors declared on October 19, 1994 a quarterly dividend of 65 cents per share, payable December 9, 1994, to shareowners of record at the close of business November 18, 1994. -15- PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. None (b) Reports on Form 8-K. A report on Form 8-K was filed on September 16, 1994 to report under Item 5 - Other Events, that on September 2, 1994, American Credit Indemnity Company (ACI), a ninety-five percent owned subsidiary of the Company, and counsel for the plaintiffs entered into an agreement to settle all claims that were or could have been asserted against ACI in the Towers Class Action for $1.25 million, as explained more fully in Note 6 - Litigation. -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: November 10, 1994 By:EDWIN A. BESCHERER, JR. Edwin A. Bescherer, Jr., Executive Vice President - Finance and Chief Financial Officer Date: November 10, 1994 By:THOMAS W. YOUNG Thomas W. Young, Senior Vice President and Controller -17- EX-27 2
5 1,000 9-MOS DEC-31-1994 SEP-30-1994 518,916 31,719 1,049,083 0 0 1,986,085 1,968,020 1,056,373 5,305,288 2,088,160 0 188,411 0 0 1,019,159 5,305,288 0 3,487,290 0 2,863,026 33,582 0 4,132 586,550 166,580 419,970 0 0 0 419,970 2.47 2.47
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