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 March 31, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 001-12277
ACNIELSEN CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 06-1454128
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(State of Incorporation) (I.R.S. Employer Identification No.)
177 Broad Street, Stamford, CT 06901
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (203) 961-3000
--------------
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 April 30, 1997
Common Stock,
par value $.01 per share 56,992,214
<PAGE>
ACNIELSEN CORPORATION
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION PAGE
- - ----------------------------- ----
Item 1. Financial Statements
Condensed Consolidated Statements of Operations (Unaudited)
Three Months Ended March 31, 1997 and 1996 3
Condensed Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended March 31, 1997 and 1996 4
Condensed Consolidated Balance Sheets
March 31, 1997 (Unaudited) and December 31, 1996 5
Notes to Condensed Consolidated Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION
- - ---------------------------
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 12
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<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
Item I. FINANCIAL STATEMENTS
ACNIELSEN CORPORATION
Condensed Consolidated Statements Of Operations (Unaudited)
(Amounts in thousands except per share amounts)
<CAPTION>
Three Months Ended
March 31,
-------------------------------------------------
1997 1996
----------------------- ----------------------
<S>
<C> <C>
Operating Revenue $324,774 $307,292
Operating Costs 190,395 179,270
Selling and Administrative Expenses 119,707 122,272
Depreciation and Amortization 23,850 24,500
----------------------- ----------------------
Operating (Loss) (9,178) (18,750)
Interest Income 2,118 1,696
Interest (Expense) (1,388) (1,313)
Other Income - Net 826 816
----------------------- ----------------------
Non-Operating Income - Net 1,556 1,199
Loss Before Income Tax Benefit (Provision) (7,622) (17,551)
Income Tax Benefit (Provision) 3,506 (1,639)
----------------------- ----------------------
Net Loss $(4,116) $(19,190)
======================= ======================
Net Loss Per Share of Common Stock $(0.07) $(0.34)
======================= ======================
Average Number of Shares Outstanding 56,919 56,556
<FN>
See accompanying notes to the condensed consolidated financial statements
(unaudited).
</FN>
3
</TABLE>
<PAGE>
<TABLE>
ACNIELSEN CORPORATION
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Amounts in Thousands)
<CAPTION>
Three Months Ended
March 31,
-------------------------------------------------------
1997 1996
------------------------- -----------------------
<S>
<C> <C>
- - --------------------------------------------------------------------------------------------------------------------------
Cash Flows from Operating Activities:
Net Loss $(4,116) $(19,190)
Reconciliation of Net Loss to Net Cash Used in Operating Activities:
Depreciation and Amortization 23,850 24,500
Deferred Income Taxes 456 720
Restructuring Payments - (1,223)
Payments Related to 1995 Non-Recurring Charge (12,188) (7,040)
Postemployment Benefit Expense - 1,666
Postemployment Benefit Payments (2,496) (4,872)
Net Decrease in Accounts Receivable 4,283 15,840
Net Increase in Other Working Capital Items (29,892) (46,615)
Other 257 (642)
- - --------------------------------------------------------------------------------------------------------------------------
Net Cash Used in Operating Activities (19,846) (36,856)
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Cash Flows from Investing Activities:
Proceeds from Marketable Securities 261 1
Payments for Marketable Securities - (303)
Capital Expenditures (9,357) (14,910)
Additions to Computer Software (3,752) (5,772)
Decrease (Increase) in Other Investments 901 (1,627)
Other (7,550) 2,785
- - --------------------------------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities (19,497) (19,826)
- - --------------------------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities:
Net Transfers from The Dun & Bradstreet Corporation - 39,610
(Decrease) Increase in Short-Term Borrowings (2,646) 6,364
Common Stock Issuances under Stock Plans 1,345 -
Other 274 (298)
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Net Cash (Used in) Provided by Financing Activities (1,027) 45,676
Effect of Exchange Rate Changes on Cash and Cash Equivalents (4,542) (782)
- - --------------------------------------------------------------------------------------------------------------------------
Decrease in Cash and Cash Equivalents (44,912) (11,788)
Cash and Cash Equivalents, Beginning of Period 185,005 89,568
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Cash and Cash Equivalents, End of Period $140,093 $77,780
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Supplemental disclosure of cash flow information:
Cash paid during the period for interest $1,350 $1,308
Cash paid during the period for income taxes $5,347 $23,857
<FN>
See accompanying notes to the condensed consolidated financial statements
(unaudited).
</FN>
4
</TABLE>
<PAGE>
<TABLE>
ACNIELSEN CORPORATION
Condensed Consolidated Balance Sheets
(Amounts in thousands)
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------------------------
March 31 December 31
1997 1996
(Unaudited)
- - --------------------------------------------------------------------------------------------------------------------------------
<S>
<C> <C>
Assets
Current Assets
Cash and Cash Equivalents $140,093 $185,005
Accounts Receivable-Net 257,446 270,603
Other Current Assets 36,938 30,822
---------------------- -------------------
Total Current Assets 434,477 486,430
- - --------------------------------------------------------------------------------------------------------------------------------
Marketable Securities and Other Investments 24,684 26,352
Property, Plant and Equipment-Net 173,831 186,053
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Other Assets-Net
Prepaid Pension 46,043 46,743
Computer Software 34,386 37,858
Intangibles & Other Assets 52,976 48,610
Goodwill 199,886 204,022
---------------------- -------------------
Total Other Assets-Net 333,291 337,233
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TOTAL ASSETS $966,283 $1,036,068
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Liabilities and Shareholders' Equity
Current Liabilities
Accounts Payable $74,884 $84,680
Short-term Debt 32,476 36,761
Accrued and Other Current Liabilities 237,237 260,606
Accrued Income Taxes 52,811 64,268
---------------------- -------------------
Total Current Liabilities 397,408 446,315
- - --------------------------------------------------------------------------------------------------------------------------------
Postretirement and Postemployment Benefits 74,704 78,924
Deferred Income Taxes 31,166 32,523
Other Liabilities 21,705 24,360
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TOTAL LIABILITIES 524,983 582,122
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Shareholders' Equity
Common Stock 572 571
Additional Paid-in Capital 462,537 461,193
Retained Earnings 3,607 7,723
Treasury Stock (3,966) (3,966)
Cumulative Translation Adjustment (26,541) (17,658)
Unrealized Gains on Investments, Net 5,091 6,083
- - --------------------------------------------------------------------------------------------------------------------------------
Total Shareholders' Equity 441,300 453,946
- - --------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 966,283 $ 1,036,068
- - --------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to the condensed consolidated financial statements (unaudited).
</FN>
5
</TABLE>
<PAGE>
ACNIELSEN 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 ACNielsen Corporation
(the "Company") 1996 Annual Report on Form 10-K. In the opinion of management,
all adjustments (which include only normal recurring adjustments), 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.
Certain prior year amounts have been reclassified to conform with the 1997
presentation.
Note 2 - Basis of Presentation
Effective on November 1, 1996 (the "Distribution Date"), the Company became an
independent, publicly-owned company as a result of the distribution by The Dun &
Bradstreet Corporation ("D&B") of the Company's $.01 par value Common Stock, at
a distribution ratio of one share for three shares (the "Distribution"). For
purposes of these financial statements, all references to the Company include
the assets and liabilities of the former D&B businesses and operations that were
transferred to the Company prior to the Distribution.
The condensed financial statements for periods prior to the Distribution Date
are presented on a combined basis and have been prepared using D&B's historical
basis of accounting for the assets and liabilities and historical results of
operations related to the Company's businesses, except for accounting for income
taxes. For the quarter ended March 31, 1996, the Company had not recognized
benefits for U.S. losses since the Company did not believe that it was more
likely than not that such benefits could be recognized on a separate-company
basis.
For the period prior to November 1, 1996, the condensed financial statements
generally reflect the results of operations and cash flows of the Company as if
it were a separate entity. The condensed financial statements include
allocations of certain D&B Corporate expenses relating to the Company's
businesses that were transferred to the Company from D&B. Management believes
these allocations are reasonable. However, the financial information included
herein may not necessarily reflect the results of operations and cash flows of
the Company in the future or what they would have been had the Company been a
separate entity during the periods prior to the Distribution.
The computation of net loss per share of common stock for the period prior to
November 1, 1996 is based on the average number of shares of D&B common stock
outstanding, adjusted for the one for three distribution ratio.
6
<PAGE>
Note 3 - Financial Instruments with Off-Balance-Sheet Risk
During the first quarter of 1997, the Company entered into foreign currency
forward contracts to reduce the effect of fluctuating European currencies on
certain known transactional exposures. At March 31, 1997, the Company had
approximately $18.5 million of foreign exchange forward contracts outstanding,
which mature on various dates over the next twelve months. Any gain or loss on
the forward contract is deferred and included in the measurement of the related
foreign currency transaction.
Note 4 - New Accounting Pronouncement
Statement of Financial Accounting Standards No. 128 ("SFAS No. 128"), Earnings
Per Share ("EPS"), which establishes standards for computing and presenting EPS,
is effective for both interim and annual periods ending after December 15, 1997.
SFAS No. 128 does not permit early application of its provisions. The Statement
replaces the presentation of primary EPS with a presentation of basic EPS, as
defined. Had EPS been determined in accordance with SFAS No. 128, the Company's
basic and diluted loss per share for the three months ended March 31, 1997 and
1996 would be unchanged from the reported loss per share.
Note 5 - Litigation
On July 29, 1996, Information Resources, Inc. ("IRI") filed a complaint in the
United States District Court for the Southern District of New York, naming as
defendants D&B, A.C. Nielsen Company (which is a subsidiary of the Company) and
I.M.S. International, Inc., a subsidiary of Cognizant Corporation ("IMS") (the
"IRI Action").
The complaint alleges various violations of the United States antitrust laws,
including alleged violations of Sections 1 and 2 of the Sherman Act. The
complaint also alleges a claim of tortious interference with a contract and a
claim of tortious interference with a prospective business relationship. These
claims relate to the acquisition by defendants of Survey Research Group Limited
("SRG"). IRI alleges that SRG violated an alleged agreement with IRI when it
agreed to be acquired by the defendants and that the defendants induced SRG to
breach that agreement.
IRI's complaint alleges damages in excess of $350 million, which amount IRI has
asked to be trebled under the antitrust laws. IRI also seeks punitive damages in
an unspecified amount.
By notice of motion dated October 15, 1996, defendants moved for an order
dismissing all claims in the complaint. On May 6, 1997 the United States
District Court for the Southern District of New York issued a decision on the
motion to dismiss. The Court dismissed IRI's claim of attempted monopolization
in the United States, with leave to replead within sixty days. The Court denied
defendants' motion with respect to the remaining claims in the complaint.
In connection with the IRI Action, D&B, Cognizant Corporation (the parent
company of IMS) and the Company have entered into an Indemnity and Joint Defense
Agreement (the "Indemnity and Joint Defense Agreement") pursuant to which they
have agreed (i) to certain arrangements
7
<PAGE>
allocating potential liabilities ("IRI Liabilities") that may arise out of or in
connection with the IRI Action and (ii) to conduct a joint defense of such
action. In particular, the Indemnity and Joint Defense Agreement provides that
the Company will assume exclusive liability for IRI Liabilities up to a maximum
amount to be calculated at the time such liabilities, if any, become payable
(the "ACN Maximum Amount"), and that Cognizant and D&B will share liability
equally for any amounts in excess of the ACN Maximum Amount. The ACN Maximum
Amount will be determined by an investment banking firm as the maximum amount
which the Company is able to pay after giving effect to (i) any plan submitted
by such investment bank which is designed to maximize the claims paying ability
of the Company without impairing the investment banking firm's ability to
deliver a viability opinion (but which will not require any action requiring
stockholder approval), and (ii) payment of related fees and expenses. For these
purposes, financial viability means the ability of the Company, after giving
effect to such plan, the payment of related fees and expenses and the payment of
the ACN Maximum Amount, to pay its debts as they become due and to finance the
current and anticipated operating and capital requirements of its business, as
reconstituted by such plan, for two years from the date any such plan is
expected to be implemented.
The Indemnity and Joint Defense Agreement also imposes certain restrictions on
the payment of cash dividends and the ability of the Company to purchase its
stock.
Management of ACNielsen is unable to predict at this time the final outcome of
the IRI Action or whether its resolution could materially affect the Company's
results of operations, cash flows or financial position.
The Company and its subsidiaries are also involved in other legal proceedings
and litigation arising in the ordinary course of business. In the opinion of
management, the outcome of such current legal proceedings, claims and
litigation, if decided adversely, could have a material effect on quarterly or
annual operating results or cash flows 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 (Dollar amounts in thousands, except per share data)
The Company's first-quarter net loss was $4,116, or $0.07 per share, a $15,074
improvement over the first quarter 1996 loss of $19,190, or $0.34 per share. The
1996 first-quarter net loss excludes the impact of a tax benefit recorded in the
third quarter of 1996 to reduce the Company's full year effective tax rate to
48%. Had the Company provided for a 48% effective tax rate in the first quarter
of 1996, net loss for the period would have been $9,128 or $0.16 per share.
8
<PAGE>
First-quarter revenue rose 5.7% to $324,774 from $307,292, reflecting the
negative impact of a strong U.S. dollar. Driven by growth in the Americas and
Asia Pacific regions, first-quarter revenue advanced 8.7% in local currency.
The Company reduced its operating loss in the first quarter by $9,572, to
$9,178, reflecting profit improvement in the United States.
Non-operating income-net in the first quarter was $1,556, compared with $1,199
in the first quarter of 1996, reflecting increased interest income on a higher
level of cash equivalents resulting from cash received from D&B in connection
with the Distribution.
The Company's operating results by geographic region for the quarters ended
March 31, 1997 and 1996 are set forth in the table below.
<TABLE>
(in thousands)
<CAPTION>
Revenues Operating Income (Loss)
----------------------------- --------------------------
1997 1996 1997 1996
<S>
<C> <C> <C> <C>
United States $73,307 $66,773 $450 $(7,464)
Canada/ Latin America 48,059 40,861 2,831 1,985
------ ------ ----- -----
Total Americas 121,366 107,634 3,281 (5,479)
Europe, Middle East & Africa 133,625 134,959 (6,998) (8,071)
Asia Pacific 61,565 56,600 (2,393) (268)
ACN Japan 8,218 8,099 (3,068) (4,932)
----- ----- ------- -------
Total $324,774 $307,292 $(9,178) $(18,750)
======== ======== ======== =========
</TABLE>
The following discusses results on a geographic basis:
Total Americas revenue increased 12.8% to $121,366 from $107,634. Excluding the
impact of currency translation, revenue grew 13.9%. Operating income was $3,281,
compared with an operating loss of $5,479 in the first quarter of 1996. In the
United States, revenue grew 9.8% to $73,307, led by increased sales of
key-account information in the retail measurement business, as well as consumer
panel services. The U.S. recorded its third consecutive profitable quarter, as
operating income reached $450, a $7,914 improvement over 1996's $7,464 operating
loss. The gain was the result of increased operating efficiency and higher
revenue.
In Canada and Latin America, revenue increased 17.6%, to $48,059, driven by
growth in each of Canada's businesses, and increased sales of retail tracking,
customized research and television audience measurement services in a number of
Latin American markets. Operating income, at $2,831, was up 42.6% from the prior
year, reflecting strong revenue growth and increased operating efficiency.
9
<PAGE>
Revenue for the Europe, Middle East & Africa ("EMEA") region declined slightly,
to $133,625, due to the impact of the strong U.S. dollar. Revenue for EMEA grew
4.2% in local currency, resulting from gains in Eastern Europe and France. EMEA
reduced its operating loss for the quarter to $6,998, from $8,071, primarily as
a result of improved operating performance in the U.K. and France. During the
quarter, the region expanded its geographic presence by acquiring a 90% interest
in a market research company in Israel, and increasing its ownership to 100% in
ACNielsen South Africa. Results of these business will be included in
ACNielsen's consolidated results beginning with the second quarter of 1997.
Asia Pacific's revenue increased 8.8% to $61,565, led by increased sales in
Taiwan and Indonesia. The region's operating loss, however, increased to $2,393,
due to higher overall operating costs. During the quarter, the Company announced
a reorganization of the Asia Pacific operations to improve client service,
further integrate its businesses across the region, enhance operating efficiency
and increase profitability.
ACNielsen Japan reported revenue of $8,218, up slightly from the prior year.
Excluding the impact of the strong U.S. dollar, revenue grew 14.7%. Japan
reduced its operating loss by $1,864, to $3,068, as it continued to more closely
align its operating costs with revenue.
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 1997 and 1996
Net cash used in operating activities for the three months ended March 31, 1997
totaled $19,846 compared with net cash used of $36,856 for the comparable period
in 1996. The decrease in cash used by operating activities primarily reflected
improved operating results ($15,074), lower non-U.S. income taxes paid of
$18,510 (included in other working capital items) and lower postemployment
benefit payments ($2,376), partially offset by increased payments related to the
1995 non-recurring charge ($5,148) and a smaller reduction in accounts
receivable primarily associated with increased revenue in the U.S.
Net cash used in investing activities totaled $19,497 for the first three months
of 1997, compared with $19,826 for the comparable period in 1996.
Net cash used in financing activities for the three months ended March 31, 1997
totaled $1,027 compared with cash provided by financing activities of $45,676
for the comparable period in 1996. The decrease in cash provided of $46,703
primarily reflected the absence of remittances from D&B of $39,610 and a
decrease in borrowings of $2,646 during the current quarter compared with an
increase in borrowings of $6,364 during the comparable period in 1996.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
10
<PAGE>
(27) Financial Data Schedule (filed electronically)
(b) Reports on Form 8-K.
There were no reports on Form 8-K filed during the quarter ended
March 31, 1997.
11
<PAGE>
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.
ACNIELSEN CORPORATION
(Registrant)
Date: May 12, 1997 By: /s/ROBERT J. CHRENC
===============================
Robert J. Chrenc
Executive Vice President
and Chief Financial Officer
Date: May 12, 1997 By: /s/WILLIAM R. HICKS
===============================
William R. Hicks
Vice President and Controller
12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 140093
<SECURITIES> 0
<RECEIVABLES> 257446
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 434477
<PP&E> 452870
<DEPRECIATION> 279039
<TOTAL-ASSETS> 966283
<CURRENT-LIABILITIES> 397408
<BONDS> 0
0
0
<COMMON> 572
<OTHER-SE> 440728
<TOTAL-LIABILITY-AND-EQUITY> 966283
<SALES> 0
<TOTAL-REVENUES> 324774
<CGS> 0
<TOTAL-COSTS> 333952
<OTHER-EXPENSES> (826)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (730)
<INCOME-PRETAX> (7622)
<INCOME-TAX> (3506)
<INCOME-CONTINUING> (4116)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4116)
<EPS-PRIMARY> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
