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, 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
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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, 1997
Common Stock,
par value $.01 per share 57,383,917
<PAGE>
ACNIELSEN CORPORATION
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Condensed Consolidated Statements of Income (Unaudited)
Three Months Ended September 30, 1997 and 1996 3
Condensed Consolidated Statements of Income (Unaudited)
Nine Months Ended September 30, 1997 and 1996 4
Condensed Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended September 30, 1997 and 1996 5
Condensed Consolidated Balance Sheets
September 30, 1997 (Unaudited) and December 31, 1996 6
Notes to Condensed Consolidated Financial Statements (Unaudited) 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
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<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
Item I. FINANCIAL STATEMENTS
ACNIELSEN CORPORATION
Condensed Consolidated Statements Of Income (Unaudited)
(Amounts in thousands except per share amounts)
<CAPTION>
Three Months Ended
September 30,
-------------------------------------------------
1997 1996
----------------------- ----------------------
<S> <C> <C>
Operating Revenue $346,864 $346,743
Operating Costs 181,308 184,335
Selling and Administrative Expenses 118,760 123,917
Depreciation and Amortization 23,653 23,295
----------------- -----------------
Operating Income 23,143 15,196
Interest Income 2,413 2,317
Interest Expense (432) (1,394)
Other Expense - Net (233) (126)
-----------------
-----------------
Non-Operating Income - Net 1,748 797
Income Before Income Tax Provision 24,891 15,993
Income Tax Provision (Benefit) 11,160 (5,889)
----------------- -----------------
Net Income $13,731 $21,882
================= =================
Net Income Per Share of Common Stock $0.23 $0.39
================= =================
Average Number of Shares Outstanding 59,540 56,713
<FN>
See accompanying notes to the condensed consolidated financial statements
(Unaudited).
</FN>
</TABLE>
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<PAGE>
<TABLE>
ACNIELSEN CORPORATION
Condensed Consolidated Statements Of Income (Unaudited)
(Amounts in thousands except per share amounts)
<CAPTION>
Nine Months Ended
September 30,
-------------------------------------------------
1997 1996
-------------------- ------------------------
<S> <C> <C>
Operating Revenue $1,027,963 $990,983
Operating Costs 563,765 539,920
Selling and Administrative Expenses 361,015 373,005
Depreciation and Amortization 70,561 70,583
---------------- -------------------
Operating Income 32,622 7,475
Interest Income 5,465 5,599
Interest Expense (2,117) (4,045)
Other Income (Expense) - Net 278 (572)
----------------
-------------------
Non-Operating Income - Net 3,626 982
Income Before Income Tax Provision 36,248 8,457
Income Tax Provision 16,384 4,059
---------------- -------------------
Net Income $19,864 $4,398
================ ===================
Net Income Per Share of Common Stock $0.34 $0.08
================ ===================
Average Number of Shares Outstanding 58,047 56,639
<FN>
See accompanying notes to the condensed consolidated financial statements
(Unaudited).
</FN>
</TABLE>
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<PAGE>
<TABLE>
ACNIELSEN CORPORATION
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Amounts in Thousands)
<CAPTION>
Nine Months Ended
September 30,
------------------------------------
1997 1996
------------------------------------
<S> <C> <C>
- - --------------------------------------------------------------------------------------------------------------------
Cash Flows from Operating Activities:
Net Income $19,864 $4,398
Reconciliation of Net Income to Net Cash Provided by
Operating Activities:
Depreciation and Amortization 70,561 70,583
Deferred Income Taxes 3,399 5,647
Restructuring Payments - (342)
Payments Related to 1995 Non-Recurring Charge (29,612) (22,387)
Postemployment Benefit Expense 547 2,308
Postemployment Benefit Payments (10,529) (16,927)
Net Decrease (Increase) in Accounts Receivable 3,187 (11,770)
Net Increase in Other Working Capital Items (12,573) (30,813)
Other 774 (554)
--
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Net Cash Provided by Operating Activities 45,618 143
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Cash Flows from Investing Activities:
Proceeds from Marketable Securities 264 314
Payments for Marketable Securities (62) (303)
Capital Expenditures (31,840) (44,981)
Additions to Computer Software (9,328) (16,818)
Payments for Business Acquisitions (5,082) -
Decrease in Other Investments 2,332 351
Other (13,766) (18,258)
--
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Net Cash Used in Investing Activities (57,482) (79,695)
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Cash Flows from Financing Activities:
Net Transfers from The Dun & Bradstreet Corporation - 217,511
(Decrease) Increase in Short-Term Borrowings (10,491) 9,410
Common Stock Issuances under Stock Plans 7,121 -
Other 509 (971)
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Net Cash (Used in) Provided by Financing Activities (2,861) 225,950
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Effect of Exchange Rate Changes on Cash and Cash Equivalents (7,894) (604)
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(Decrease) Increase in Cash and Cash Equivalents (22,619) 145,794
Cash and Cash Equivalents, Beginning of Period 185,005 89,568
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Cash and Cash Equivalents, End of Period $162,386 $235,362
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Supplemental disclosure of cash flow information:
Cash paid during the period for interest $1,983 $3,941
Cash paid during the period for income taxes $22,624 $40,656
<FN>
See accompanying notes to the condensed consolidated financial statements
(Unaudited).
</FN> -5-
</TABLE>
<PAGE>
<TABLE>
ACNIELSEN CORPORATION
Condensed Consolidated Balance Sheets
(Amounts in thousands)
<CAPTION>
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September 30 December 31
1997 1996
(Unaudited)
- - ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current Assets
Cash and Cash Equivalents $162,386 $185,005
Accounts Receivable-Net 253,611 270,603
Other Current Assets 31,343 30,822
----------------- -------------
Total Current Assets 447,340 486,430
Marketable Securities and Other Investments 43,141 26,352
Property, Plant and Equipment-Net 163,412 186,053
Other Assets
Prepaid Pension 49,169 46,743
Computer Software-Net 29,613 37,858
Intangibles & Other Assets-Net 48,705 48,610
Goodwill-Net 203,043 204,022
----------------- -------------
Total Other Assets 330,530 337,233
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TOTAL ASSETS $984,423 $1,036,068
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Liabilities and Shareholders' Equity
Current Liabilities
Accounts Payable $73,434 $84,680
Short-Term Debt 25,296 36,761
Accrued and Other Current Liabilities 231,669 260,606
Accrued Income Taxes 54,798 64,268
----------------- -------------
Total Current Liabilities 385,197 446,315
Postretirement and Postemployment Benefits 67,394 78,924
Deferred Income Taxes 39,039 32,523
Other Liabilities 26,520 24,360
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TOTAL LIABILITIES 518,150 582,122
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Commitments and Contingencies
Shareholders' Equity
Common Stock 576 571
Additional Paid-in Capital 468,309 461,193
Retained Earnings 27,587 7,723
Treasury Stock (3,966) (3,966)
Cumulative Translation Adjustment (43,139) (17,658)
Unrealized Gains on Investments, Net 16,906 6,083
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Total Shareholders' Equity 466,273 453,946
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $984,423 $1,036,068
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<FN>
See accompanying notes to the condensed consolidated financial statements
(Unaudited).
</FN>
</TABLE>
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<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 in 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 six months ended June 30, 1996, the Company had not recognized
benefits for U.S. losses. During the three months ended September 30, 1996, the
effective tax rate was adjusted to 48.0% on a year-to-date 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.
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<PAGE>
The computation of net income per share of common stock for the periods 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.
The weighted average number of shares outstanding increased by 1.0 million
shares and 2.3 million shares for the nine-month and three-month periods ended
September 30, 1997, respectively, due to the rise in the Company's stock price
and the related impact of the assumed exercise of outstanding stock options.
Note 3 - Financial Instruments with Off-Balance-Sheet Risk
During the first nine months of 1997, the Company entered into foreign currency
forward contracts to reduce the effect of fluctuating European currencies on
certain known transactional exposures. At September 30, 1997, the Company had
approximately $11.2 million of foreign exchange forward contracts outstanding,
which mature on various dates over the next seven 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 income per share for the nine months ended and three months
ended September 30, 1996 would be unchanged from the reported net income per
share. However, basic income per share for the three and nine month periods
ended September 30, 1997 would have been $0.24 and $0.35, respectively, or $0.01
higher than diluted income 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 "A.C.
Nielsen") 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.
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<PAGE>
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. On
June 3, 1997, defendants filed an answer and counterclaims. Defendants denied
all material allegations of the complaint. In addition, A.C. Nielsen
asserted counterclaims against IRI alleging that IRI has made false and
misleading statements about A.C. Nielsen's services and commercial activities
and that such conduct constitutes a violation of Section 43(a) of the Lanham Act
and unfair competition. A.C. Nielsen seeks injunctive relief and damages.
On July 7, 1997, IRI filed an amended complaint seeking to replead the claim of
attempted monopolization in the United States, which had been dismissed by the
Court in its May 6, 1997 decision. By notice of motion dated August 18, 1997,
defendants moved for an order dismissing the amended claim. The motion is under
consideration by the Court.
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 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.
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<PAGE>
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 third-quarter net income was $13,731, or $0.23 per share, compared
with reported third quarter 1996 net income of $21,882 or $0.39 per share. The
1996 third-quarter net income includes the impact of a tax benefit recorded in
the quarter to reduce the Company's year-to-date effective tax rate to 48%.
Excluding the impact of the tax benefit, net income for the third quarter of
1997 improved by $5,415 or $0.08 per share.
Third-quarter revenue of $346,864, remained essentially even with last year,
reflecting the negative impact of a strong U.S. dollar. Driven by growth in each
region, third-quarter revenue advanced 6.8% in local currency.
The Company's operating income in the third quarter increased by 52.3% to
$23,143. This increase was due to a substantial rise in U.S. operating income, a
double-digit gain in Asia Pacific, and much improved results in Japan.
Non-operating income-net in the third quarter increased by $951, to $1,748,
reflecting lower interest expense on lower borrowings.
The Company's operating results by geographic region for the quarters ended
September 30, 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 $78,248 $73,064 $8,240 $868
Canada/ Latin America 51,128 47,675 6,922 7,779
------ ------ ----- -----
Total Americas 129,376 120,739 15,162 8,647
Europe, Middle East & Africa 139,514 150,390 5,393 6,805
Asia Pacific 69,018 66,595 4,721 3,261
ACN Japan 8,956 9,019 (2,133) (3,517)
----- ----- ------- -------
Total $346,864 $346,743 $23,143 $15,196
======== ======== ======= =======
</TABLE>
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<PAGE>
The following discusses third quarter results on a geographic basis:
Total Americas revenue increased 7.2% to $129,376 from $120,739. Excluding the
impact of currency translation, revenue grew 8.6%. Operating income increased
75.3% to $15,162, from $8,647 in the third quarter of 1996. In the United
States, revenue grew 7.1% to $78,248, led by increased sales of key-account
information and custom trading area data in the retail measurement business, and
in consumer panel services, which benefited from expansion of the base business
and the addition of new services. The U.S. recorded its fifth consecutive
profitable quarter, as improved operating efficiency combined with higher
revenue produced $8,240 of operating income, compared with operating income of
$868 in 1996.
In Canada and Latin America, revenue increased 7.2%, to $51,128 from $47,675.
Excluding the impact of foreign currency translation, revenue increased 10.9%.
Canada produced double-digit revenue growth, led by higher sales of retail
measurement services, while Latin America had a solid revenue quarter, with
particularly strong performances in Mexico and Colombia. Operating income,
however, was down $857 to $6,922 from $7,779, due to a slower-than-expected
turnaround of the Company's operations in Argentina, and the negative impact of
currency translation in several Latin American markets.
Revenue for the Europe, Middle East & Africa ("EMEA") region declined 7.2%, to
$139,514, after absorbing a negative $18.3 million currency translation impact.
Operating income, including a negative foreign exchange impact of $2.3 million,
was $5,393, down $1,412 from 1996. In local currency, the region achieved a 4.9%
gain in revenue and a 12.5% improvement in operating income. The gains were due
to improved results in the U.K., Ireland, the Netherlands, Scandinavia and
Eastern Europe, and the addition of revenue and income from new or expanded
operations in Turkey, South Africa and Israel.
Asia Pacific's revenue increased 3.6% to $69,018, from $66,595, despite the
devaluation of several Southeast Asia currencies against the U.S. dollar.
Revenue for Asia Pacific grew 8% in local currency, with Taiwan, Korea, the
Philippines, Malaysia and Indonesia providing particularly strong results.
Reported operating income increased 44.8% to $ 4,721 from $3,261. Operating
income rose 60.7% in local currency, boosted by the region's continued focus on
client service, operating efficiency and profitability.
ACNielsen Japan reported revenue of $8,956, essentially unchanged from the prior
year. Excluding the impact of the strong U.S. dollar, revenue grew 6.2%,
resulting from strong retail measurement sales. With strong volume, tighter cost
controls and a favorable impact of currency on costs, ACNielsen Japan continued
to lower its operating loss, which amounted to $2,133 for the quarter, a 39.4%
improvement over the prior year.
Net income for the nine months ended September 30, 1997 was $19,864 or $0.34 per
share, compared with $4,398, or $0.08 per share a year ago.
Revenue for the nine months ended September 30, 1997 was $1,027,963, an increase
of 3.7% from the nine-month period of 1996, reflecting the negative impact of a
strong U.S. dollar. Driven by growth in all regions, revenue advanced 8.9% in
local currency. The Company increased its operating income in the first nine
months of the year by $25,147, to $32,622, despite a negative translation impact
of $5.5 million.
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<PAGE>
Non-operating income-net was $3,626, compared with $982 in the first nine months
of 1996, primarily reflecting lower interest expense.
The Company's operating results by geographic region for the nine months ended
September 30, 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 $229,761 $209,482 $12,958 $(9,684)
Canada/ Latin America 151,686 133,348 16,818 17,191
------- ------- ------ ------
Total Americas 381,447 342,830 29,776 7,507
Europe, Middle East & Africa 422,513 436,783 6,638 7,965
Asia Pacific 198,754 185,743 4,079 4,442
ACN Japan 25,249 25,627 (7,871) (12,439)
------ ------ ------- --------
Total $1,027,963 $990,983 $32,622 $7,475
========== ======== ======= ======
</TABLE>
The following discusses results for the nine months ended September 30, 1997 on
a geographic basis:
Year-to-date total Americas revenue increased 11.3% to $381,447 from $342,830.
Excluding the impact of currency translation, revenue grew 12.7%. Operating
income was $29,776, compared with $7,507 in the first nine months of 1996.
In the United States, revenue grew 9.7% to $229,761, led by strong performances
in Retail Management Services and Consumer Panel. Operating income reached
$12,958, a $22,642 improvement over 1996's operating loss of $9,684.
The gain was the result of increased operating efficiency and revenue growth.
In Canada and Latin America, year-to-date revenue grew 13.8%, led by increases
in both regions. In local currency, revenue grew 17.5%. Operating income
decreased 2.2% to $16,818 from $17,191 in 1996, primarily from a slower than
expected turnaround of the Company's operations in Argentina and the negative
impact of currency translation in several Latin American countries.
Revenue for the first nine months of 1997 in the Europe, Middle East & Africa
("EMEA") region declined 3.3% to $422,513, from $436,783 in 1996, due to the
impact of the strong U.S. dollar. Revenue for EMEA grew 5.7% in local currency,
resulting from gains in Western Europe, Eastern Europe, Great Britain and
Ireland, and the new acquisitions in South Africa, Turkey and Israel. Operating
income decreased $1,327, to $6,638, principally from the impact of a strong U.S.
dollar.
Asia Pacific's year-to-date revenue increased 7.0% to $198,754 from $185,743,
led by increased sales in Northern Asia and Southeast Asia. Revenue for Asia
Pacific grew 9.3% in local currency. The region's operating income was $4,079
compared with operating income of $4,442 in 1996, due to higher overall
operating expenses in the first quarter of 1997 and the impact of the stronger
U.S. dollar.
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<PAGE>
Revenue for ACNielsen Japan was down slightly from 1996 to $25,249. Excluding
the impact of the strong U.S. dollar, revenue in local currency was up 10%.
Japan reduced its operating loss by $4,568, to $7,871, as higher local currency
revenue, cost control efforts and a favorable impact of currency on costs
contributed to the operating improvement.
Condensed Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1997 and 1996
Net cash provided by operating activities for the nine months ended September
30, 1997 totaled $45,618, compared with $143 for the comparable period in 1996.
The change primarily is the result of improved operating results (net income of
$19,864 in 1997 as compared with net income of $4,398 in 1996), lower income
taxes paid of $18,032 (included in other working capital items), improved
collection of accounts receivable ($14,957) and lower postemployment benefit
payments ($6,398), partially offset by increased payments related to the 1995
non-recurring charge ($7,225).
Net cash used in investing activities totaled $57,482 for the nine months ended
September 30, 1997, compared with $79,695 for the comparable period in 1996. The
decrease in cash used in investing activities primarily represents lower capital
expenditures ($13,141) and lower additions to computer software ($7,490), offset
by increased payments for acquisition of businesses ($5,082).
Net cash used in financing activities for the nine months ended September 30,
1997 totaled $2,861, compared with net cash provided by financing activities of
$225,950 for the comparable period in 1996. The decrease in the cash provided of
$228,811 primarily reflected the absence of remittances from D&B of $217,511 and
a decrease in borrowings in the current year of $10,491, as compared with
increased borrowings of $9,410 during the comparable period in 1996.
Year 2000
The Company relies on software and related technologies in the operation
of its business. In connection with the Year 2000, the Company currently
believes that it will be able to modify or replace its affected systems in a
timely manner and with no disruptions to its operations.
Preliminary estimates of the total Year 2000 compliance costs to be incurred
with respect to the affected systems approximate $15 to $20 million over the
costs of normal software upgrades and replacements. Maintenance or modification
costs will be expensed as incurred, while the costs of new software will be
capitalized and amortized over the software's useful life. Such costs will be
incurred primarily in 1998.
The Company also is communicating with its data suppliers and customers
regarding the Year 2000 issue. Failure by data suppliers to successfully address
the issue could result in delays in data becoming available to the Company for
use in its products and services. Failure by customers could disrupt their
ability to maximize their use of such products and services. The Company
is currently unable to determine the effect, if any, that such failures
might have on the Company's operations or future business results.
-13-
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
(4) Instruments Defining the Rights of Security Holders, Including
Indentures First Amendment dated as of July 1, 1997 to the
ACNielsen Corporation $125,000,000 Credit Agreement dated as
of December 19, 1996
(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
September 30, 1997.
-14-
<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: November 13, 1997 By: /s/ROBERT J. CHRENC
=============================
Robert J. Chrenc
Executive Vice President
and Chief Financial Officer
Date: November 13, 1997 By: /s/WILLIAM R. HICKS
=============================
William R. Hicks
Vice President and Controller
-15-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 162,386
<SECURITIES> 0
<RECEIVABLES> 253,611
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 447,340
<PP&E> 442,754
<DEPRECIATION> 279,342
<TOTAL-ASSETS> 984,423
<CURRENT-LIABILITIES> 385,197
<BONDS> 0
0
0
<COMMON> 576
<OTHER-SE> 465,697
<TOTAL-LIABILITY-AND-EQUITY> 984,423
<SALES> 0
<TOTAL-REVENUES> 1,027,963
<CGS> 0
<TOTAL-COSTS> 995,341
<OTHER-EXPENSES> (278)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (3,348)
<INCOME-PRETAX> 36,248
<INCOME-TAX> 16,384
<INCOME-CONTINUING> 19,864
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,864
<EPS-PRIMARY> 0.34
<EPS-DILUTED> 0.34
</TABLE>
FIRST AMENDMENT (the "Amendment") dated as of July 1, 1997 to the Credit
Agreement dated as of December 19, 1996 (the "Credit Agreement"), among
ACNIELSEN CORPORATION (the "Company"), the financial institutions party thereto
(the "Lenders"), THE CHASE MANHATTAN BANK, as administrative agent for the
Lenders (in such capacity, the "Administrative Agent"), and THE NORTHERN TRUST
COMPANY, as Co-Agent.
The Company has requested that the Credit Agreement be amended in order
to permit it, within the terms set forth herein, to, among other things, effect
transfers of certain equity interests among the Company and its Subsidiaries
for tax and other business purposes. The Lenders and the Administrative Agent
have agreed to such amendments upon the terms and subject to the conditions set
forth herein. Accordingly, the parties hereto agree as follows:
SECTION 1. Defined Terms. Capitalized terms used and not
otherwise defined herein shall have the meanings assigned to them in the
Credit Agreement.
SECTION 2. Amendments to the Credit Agreement.
(a) Section 6.04 (a) (v) of the Credit Agreement is hereby amended to read
in its entirety as follows:
"(A) any initial equity Investment in any Subsidiary
created after the date hereof or in any Subsidiary that
was dormant on the date hereof; (B) any Investment
described in the Letter from the Company to the Lenders
dated June 15, 1997 under the heading "Tax Planning
Initiatives" or any other Investment by a Subsidiary for
tax planning purposes, and which does not involve the
downstream flow of assets from the Company to
Subsidiaries, (1) resulting from the transfer to
such Subsidiary of the capital stock or Indebtedness of
any other Subsidiary, (2) resulting from the cancellation
or forgiveness of any Indebtedness of a Subsidiary,
(3) resulting from the issuance of additional shares of
capital stock of a Subsidiary or (4) to fund loans by any
other Subsidiary to the Company or any other Subsidiary;
and (C) other equity Investments in Subsidiaries in an
aggregate amount not in excess of $25,000,000;"
(b) Section 6.05 (a) of the Credit Agreement is hereby amended
to read in it entirety as follows:
"the Company may make Restricted Payments payable solely
in additional shares of its common stock,"
(c) Section 5.01 is hereby amended to omit clause (iv) of
paragraph (c) and to add a new paragraph (h), as follows:
"(h) concurrently with delivery of financial statements
under clause (a) above and, at the request of the
Administrative Agent, concurrently with delivery of
financial statements under clause (b)above, a certificate
of a Financial Officer of the Company identifying all
Subsidiaries and ownership interests therein and
indicating all changes in the ownership of subsidiaries
since the date of the last certificate provided under
this paragraph (h)."
(d) Clause (v) of the definition of "Fixed Charge Coverage
Ratio" in Section 1.01 of the Credit Agreement is hereby amended by replacing
the reference to "$10,000,000" with "$20,000,000".
SECTION 3. Representations and Warranties. The Company hereby
represents and warrants to each Lender and the Administrative Agent that this
Amendment has been duly authorized, executed and delivered by it and constitutes
its legal, valid and binding obligation enforceable against it in accordance
with its terms, except as enforcement thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other similar laws
affecting the enforceability of creditors' rights generally and by general
principles of equity.
SECTION 4. Effectiveness. This Amendment shall become effective when
the Administrative Agent shall have received counterparts of this Amendment
which, when taken together, bear the signatures of the Company, the
Administrative Agent, and the Required Lenders.
SECTION 5. Applicable Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. Expenses. The Company shall pay all reasonable
out-of-pocket expenses incurred by the Administrative Agent in connection with
the preparation, negotiation, execution, delivery and enforcement of this
Amendment, including, but not limited to, the reasonable fees, charges and
disbursements of Cravath, Swaine & Moore, counsel for the Administrative Agent.
SECTION 7. Counterparts. This Amendment may be executed in any
number of counterparts (including by facsimile transmission), each of which
shall constitute an original but all of which when taken together shall
constitute but one agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed by their duly authorized officers, all as of the date first above
written.
ACNIELSEN CORPORATION,
by: F.D. MARTELL
Name: F.D. Martell
Title: Vice President and Treasurer
THE CHASE MANHATTAN BANK,
individually and as
Administrative Agent,
by: TRACEY A. NAVIN
Name: Tracey A. Navin
Title: Vice President
THE NORTHERN TRUST COMPANY,
by: JOSEPH YACULLO
Name: Joseph Yacullo
Title: Vice President
ABN AMRO BANK N.V., NEW YORK BRANCH,
by: JOHN N. SMITH
Name: John N. Smith
Title: Vice President
by: R. SCOTT BORAC
Name: R. Scott Borac
Title: Assistant Vice President
THE BANK OF NEW YORK,
by: KENNETH P. SNEIDER, JR.
Name: Kenneth P. Sneider, Jr.
Title: Vice President
CORESTATES BANK, N.A.,
by: BRIAN M. HALEY
Name: Brian M. Haley
Title: Vice President
CREDITO ITALIANO,
by: HARMON P. BUTLER
Name: Harmon P. Butler
Title: First Vice President
and Deputy Manager
by: UMBERTO SERETTI
Name: Umberto Seretti
Title: Vice President
THE FIRST NATIONAL BANK OF BOSTON,
by: LISA GELFAND ABRAMS
Name: Lisa Gelfand Abrams
Title: Vice President
MIDLAND BANK PLC, NEW YORK BRANCH,
by: J.P. BOLLINGTON
Name: J.P. Bollington
Title: Vice President
PNC BANK, NATIONAL ASSOCIATION,
by: SARAH L. McCLINTOCK
Name: Sarah L. McClintock
Title: Vice President
<PAGE>
THE SANWA BANK LIMITED,
by: DOMINIC J. SORRESSO
Name: Dominic J. Sorresso
Title: Vice President
SOCIETE GENERALE, NEW YORK BRANCH,
by: ALAN ZINSER
Name: Alan Zinser
Title: Assistant Vice President
TORONTO DOMINION (NEW YORK), INC.,
by: JORGE A GARCIA
Name: Jorge A. Garcia
Title: Vice President
