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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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(Mark One)
X Annual Report Pursuant to Section 13 or 15(d) of the Securities
- - ---------- Exchange Act of 1934
For the fiscal year ended December 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__________.
Commission file number 001-12277
ACNielsen Corporation
(Exact name of registrant as specified in its charter)
Delaware 06-1454128
(State of incorporation) (I.R.S. Employer Identification No.)
177 Broad Street, Stamford, Connecticut 06901
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 961-3000.
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange
on which registered
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Common Stock, par value $.01 per share. . . . . . . .. .New York Stock Exchange
Preferred Share Purchase Rights. . . . . . . . . . . . .New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
As of January 31, 1998, 57,307,550 shares of Common Stock of ACNielsen
Corporation were outstanding. The aggregate market value of the shares of Common
Stock held by nonaffiliates of the registrant (based upon its closing
transaction price on the Composite Tape on January 30, 1998) was approximately
$1,235 million.*
*Calculated by excluding all shares held by executive officers and directors of
the registrant, without conceding that all such persons are affiliates of the
registrant for purposes of the Federal securities laws.
Documents Incorporated by Reference
-----------------------------------
Parts I and II: Portions of Registrant's Annual Report to Shareholders for
the 1997 Fiscal Year.
Part III: Portions of Registrant's Proxy Statement dated March 13, 1998.
The Index to Exhibits is located on Pages 18 to 20.
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PART I
As used in this report, except where the context indicates otherwise,
the terms "Company" and "ACNielsen" mean ACNielsen Corporation and all
subsidiaries consolidated in the financial statements incorporated herein by
reference.
ITEM 1. BUSINESS
General
ACNielsen Corporation began operating as an independent, publicly-held
company on November 1, 1996 (the "Distribution Date") as a result of the
distribution (the "Distribution") on that date by The Dun & Bradstreet
Corporation ("D&B") to D&B's shareholders of the Company's $.01 par value Common
Stock, at a distribution ratio of one share of the Company for three shares of
D&B. As part of a reorganization of its businesses, D&B also distributed all of
the outstanding common stock of Cognizant Corporation ("Cognizant") on the
Distribution Date.
ACNielsen Corporation, which has its headquarters in Stamford,
Connecticut, was incorporated in the State of Delaware on April 30, 1996 as a
wholly-owned subsidiary of D&B for the purpose of effecting the Distribution.
ACNielsen Corporation operates principally through subsidiaries and the Company
generally is comprised of the former D&B businesses that deliver market
research, information and analysis to the worldwide consumer products and
services industries.
Description of Business
ACNielsen is a global leader in delivering market research, information
and analysis to the consumer products and services industries. ACNielsen
services are offered in over 90 countries around the globe. ACNielsen provides
its clients with market research, information and analysis for understanding and
making critical decisions about their products and their markets. ACNielsen also
conducts media measurement and related businesses, including its television
audience measurement business which operates outside the U.S. and Canada.
ACNielsen operates outside the United States through a number of
subsidiaries, affiliates and joint ventures. In 1997, more than 75% of
ACNielsen's revenues were generated outside the United States.
ACNielsen operates across a wide spectrum of research services. These
services generally fall into four categories: Retail Measurement Services,
Customized Research Services, Media Measurement Services and Consumer Panel
Services.
ACNielsen also offers its customers, through a wide range of modeling
and analytic services, custom-tailored insights into complex marketing and sales
issues. Typical assignments range from marketing-mix modeling to category
management analysis, including topics as diverse as pricing strategy, consumer
driven market structure, variety management, outlet switching and promotion
tactics.
ACNielsen's clients include retailers, brokers and distributors of
retail information, manufacturers of consumer packaged goods and other products,
and companies operating in various service industries (including financial
services, telecommunications, advertising, television and radio broadcasting,
motion pictures and publishing).
ACNielsen operates in one industry segment, Market Research,
Information and Analysis Services. The approximate revenues attributable to each
category of service provided by ACNielsen were as follows for the periods shown
(in millions of dollars):
Year ended December 31,
-----------------------
1997 1996 1995
---- ---- ----
Retail Measurement...................... $ 989 $ 974 $ 938
Customized Research..................... 191 188 172
Media Measurement....................... 120 114 99
Consumer Panel.......................... 92 83 72
------------ ---------- ----------
Total...................... $ 1,392 $ 1,359 $ 1,281
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The number of full-time equivalent employees of the Company at December
31, 1997 was approximately 19,800. Of this number, approximately 2,342 full-time
equivalent employees are located in the United States, and none of these are
represented by labor unions. ACNielsen's non-U.S. employees are subject to
numerous labor council or similar relationships which vary due to the diverse
cultures in which ACNielsen operates. Management believes that labor relations
generally are satisfactory and have been maintained in a normal and customary
manner.
Retail Measurement Services
Through its Retail Measurement Services, the cornerstone of ACNielsen's
business, the Company delivers data to customers on product movement and related
causal information (ie. coupons, in-store promotions and other information
or conditions affecting sales) on six continents. Introduced in 1933,
ACNielsen's original Food and Drug Indexes soon became the industry
measurement tool for understanding the dynamics of product sales. Over the
years, technology has dramatically improved ACNielsen's ability to collect
and analyze information from retailers and consumers. The availability of
scanning technology in retail outlets in many countries around the world has
broadened both the scope and capabilities of ACNielsen's original retail
indexes.
ACNielsen's Retail Measurement Services are available in over 65
countries. Retail Measurement Services include scanning and retail audit
services, account level reports, information delivery, merchandising and
category management services and marketing and sales applications, along with
modeling and analytic services.
Further expanding its global services, in late 1997, ACNielsen acquired
Entertainment Data, Inc. (EDI), a provider of box office information for the
motion picture industry. Based in Beverly Hills, California, EDI provides
overnight information on box office receipts to studios and exhibitors in the
U.S. motion picture industry. EDI also has operations in the U.K., Germany,
Spain and France. The information provided by EDI helps users decide where and
for how long a movie will play, as well as how advertising and promotional
dollars will be spent.
Scanning
Using the bar codes printed on products and scanners installed in
retail outlets, ACNielsen gathers information from stores in the United
States and Canada and certain countries in Europe, Latin America and Asia
Pacific. ACNielsen's customers can monitor performance trends and evaluate price
and promotion effectiveness by tracking and forecasting non-promoted as well as
promotional product movement.
ACNielsen offers a number of additional services to enhance each
customer's understanding of its markets. Among these are services reporting data
by customer-defined markets, services aggregating consumer data in multiple
channels, and services disaggregating data to satisfy particular needs of
customers.
Retail Audit
In addition to scanning data (which is available only in certain
industry sectors and in certain countries), retail audit is a valuable source of
market information as a basic measurement tool and as a supplement to
scanning data. Retail audit involves the continuous measurement by
ACNielsen field auditors of product and category performance in the retail
trade, and reporting to clients on sales, distribution, stocks, prices
and other measures which assist them in marketing and trade negotiations.
Retail Audit is divided into industry segments, traditionally called
Indexes. The Food Index is generally the largest, but there are also Health and
Beauty, Durables, Confectionery, Liquor, Cash & Carry, plus a number of local
country Indexes.
In-Store Observation
ACNielsen field auditors collect data on where products are located in
stores, how many facings they have, on which shelves they are positioned, etc.
(broken down by store type, store size and geographic region). ACNielsen also
collects causal data. These data add to market insights and help to monitor the
implementation of retailer/manufacturer promotional agreements in terms of
numeric distribution, space allocation and promotional execution.
Levels of Information
ACNielsen provides information and insight to customers from a macro to
a micro level. Whether on a country, market or individual retailer level,
ACNielsen measures the competitive environment in which manufacturers and
retailers conduct business. In some countries ACNielsen also provides store
census data which allow retailers and manufacturers to understand consumer
behavior within a specific store or group of stores as well as within a retail
trading area.
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ACNielsen's account-specific information provides sales and marketing
managers with a comprehensive array of retailer-specific sales and merchandising
information, producing reports of product and category performance that
encompass an organization's own brands as well as competing brands.
On a global basis, ACNielsen sells and provides to its multi-national
customers international reports within and across country boundaries. Products
include an International Database (periodic reports of a multi-country retail
database) and an International Market Report (a one-time report on a market and
its competitive environment).
Delivery of Information
ACNielsen converts the data which it collects into insights yielding
competitive advantage for its clients. These include multi-dimensional
reporting, analytical modeling, data navigation and expert systems tools, with
services offered in over 65 countries. ACNielsen delivers its information to
customers on-line, via CD-ROM and other electronic media, and in printed
reports.
ACNielsen INF*ACT Workstation software is an integrated Windows-based
analytical and applications development tool set used worldwide by ACNielsen's
customers. Employing on-line analytical processing capabilities, the Workstation
enables organizations to access and analyze a wide range of corporate and
syndicated information.
ACNielsen also offers a series of Windows-based intelligent business
applications that enhance ACNielsen INF*ACT Workstation functionality, giving
organizations the ability to plan, analyze and execute successful marketing and
sales programs. Among these applications are Opportunity Explorer, Executive
Spotlight, Business Review, Trade Manager, Category Manager, Promotion
Optimizer, BrandView and BrandTrack.
In addition, ACNielsen offers merchandising tools through the SPACEMAN
portfolio of products and the PRICEMAN products.
Customized Research Services
Customized Research Services are used by manufacturers, retailers,
financial institutions and other service organizations that seek to understand
the position of their current, new and proposed products and services in the
marketplace. With customized research capabilities in more than half of the
countries in which it operates, ACNielsen is well-positioned to offer its global
retail measurement clients, including both manufacturers and retailers, consumer
insights from customized research as well as an understanding of dynamic
new markets such as entertainment, fast foods, financial services and
telecommunications.
In the fourth quarter, the Company launched Customer eQ in the Asia
Pacific Region, ACNielsen's first proprietary customized research product
in that region. Customer eQ is designed to enable clients to more
effectively measure and evaluate such factors as customer satisfaction and
loyalty that influence the value of their businesses.
In addition to services at the country level, ACNielsen offers
multi-country customized studies at both the regional and global levels and has
specialist offices in Hong Kong, London, New York, Tokyo and Singapore to carry
out customized research in Asia Pacific, Western Europe, North and South
America, the Middle East and Africa.
Media Measurement Services
The information produced by Media Measurement Services includes
audience estimates for television, radio and print, plus advertising expenditure
measurement and customized media research. Television and radio ratings and
readership data are used by program producers, broadcasters, publishers, media
planners, airtime buyers and others, on behalf of manufacturers/advertisers and
media owners, to determine the best, most cost-efficient way of reaching
customers.
ACNielsen's television audience measurement services, which operate
outside the United States and Canada, generally use representative panels of
households, each with a meter attached to each television in the household. The
meters register viewership, which can be matched with broadcast information to
identify viewing of specific programs. In a few countries written diaries are
used instead of, or in addition to, meters, with viewers writing the channels,
programs and the times watched. With both meter and diary panels, aggregate
individual and household viewing is projected to represent national viewing
habits.
Outside of Latin America, ACNielsen's television audience measurement
services are operational in approximately 18 countries, primarily in the Asia
Pacific Region. Indonesia converted its diary-based measurement systems to
electronic meters in 1997. A joint venture in which ACNielsen is a partner
is currently establishing a meter panel in India.
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In connection with the Distribution, ACNielsen entered into the TAM
Master Agreement (the "TAM Master Agreement") with Cognizant relating to the
conduct of the television audience measurement business (the "TAM Business").
See "TAM Master Agreement" below for further information on the TAM Master
Agreement.
ACNielsen's advertising expenditure measurement services provide to
customers, primarily advertising agencies and manufacturers/advertisers,
verification that individual commercials or commercial campaigns ran as
contracted, report the costs of the manufacturers' own and competitors'
advertisements and alert users to new and competitive ad campaigns.
Effective January 1998, the Company became a partner in a joint
venture, IBOPE Media Information. The joint venture, operating in Latin America,
offers television audience measurement services in nine markets, provides radio
audience measurement services in two countries and advertising expenditure
measurement services in four countries.
Consumer Panel Services
Consumer Panel Services help organizations achieve competitive
advantage by applying consumer insights derived from the ACNielsen consumer
panel database. With a comprehensive portfolio of tools for reporting and
analysis, ACNielsen measures the multi-faceted dynamics of consumer behavior
across all outlets including: consumer demographics, percentages of households
purchasing, products and quantities purchased, frequency of purchases, shopping
trips and shopping expenditures, price and promotion sensitivity, price paid,
and attitude and usage information.
In the United States, the ACNielsen Consumer Panel, called Homescan,
consists of approximately 52,000 demographically balanced U.S. households that
use hand-held scanners to record every bar-coded item purchased. Outside the
United States, more than 67,000 households in 14 countries are included in the
ACNielsen consumer panel databases.
ACNielsen employs multiple data collection processes throughout the
world. In the United States and several other countries covering approximately
90% of total panel households worldwide, ACNielsen installs in-home scanners
with which panelists scan items at home as they unpack purchases from each
shopping trip, recording price, promotions and quantity purchased, as well as
the age and gender of the shopper and intended user. Information detailing each
shopping trip is immediately transmitted, via telephone lines, to ACNielsen.
Consumer panel applications can be used by both manufacturers and
retailers to understand demographics and purchasing habits of consumers. As with
all information derived from the ACNielsen Consumer Panel, data capture activity
is from all outlet types including grocery, drug, mass merchandiser and
warehouse clubs. Customers can choose from a wide variety of applications or
analyses, from syndicated to customized and basic to complex. ACNielsen offers a
full suite of syndicated category management applications. These reports give
manufacturers and retailers insights into cross outlet shopping, consumer
loyalty and the value of consumer segments such as the value of core versus
occasional shoppers.
ACNielsen also provides delivery tools that allow marketers to process,
chart and analyze ACNielsen Consumer Panel information quickly and easily. Among
these are CD-ROM tools and Panel*Fact for Windows, which enable managers to
create customized reports to meet their individual analytic needs and to share
data and analyses with various members within an organization.
Relationship Among ACNielsen, D&B and Cognizant after the Distribution
Prior to the Distribution, D&B, Cognizant and ACNielsen entered into
certain agreements governing their relationship subsequent to the Distribution
and providing for the allocation of tax, employee benefits and certain other
liabilities and obligations arising from periods prior to the Distribution. The
following description summarizes certain terms of such agreements, but is
qualified by reference to the texts of such agreements which were previously
filed with the Securities and Exchange Commission.
Distribution Agreement
D&B, Cognizant and ACNielsen entered into a Distribution Agreement
providing for, among other things, certain corporate transactions required to
effect the Distribution and other arrangements among D&B, Cognizant and
ACNielsen subsequent to the Distribution.
In particular, the Distribution Agreement defined the assets and
liabilities allocated to and assumed by Cognizant and those allocated to and
assumed by ACNielsen. The Distribution Agreement also defined what constituted
the "Cognizant Business" and what constituted the "ACNielsen Business".
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Pursuant to the Distribution Agreement, D&B transferred all its right,
title and interest in the assets comprising the Cognizant Business to Cognizant
and all its right, title and interest in the assets comprising the ACNielsen
Business to ACNielsen; Cognizant transferred all its right, title and interest
in the assets comprising the D&B business to D&B and all its right, title and
interest in the assets comprising the ACNielsen Business to ACNielsen; and
ACNielsen transferred all its right, title and interest in the assets comprising
the D&B business to D&B and all its right, title and interest in the assets
comprising the Cognizant Business to Cognizant. All assets were transferred
without any representation or warranty, "as is-where is", and the relevant
transferee bears the risk that any necessary consent to transfer was not
obtained.
The Distribution Agreement provided for, among other things,
assumptions of liabilities and cross indemnities designed to allocate generally,
effective as of the Distribution Date, financial responsibility for the
liabilities arising out of or in connection with (i) the Cognizant Business,
including the IMS and Nielsen Media Research businesses, to Cognizant, (ii) the
ACNielsen Business to ACNielsen and (iii) all other liabilities to D&B.
Pursuant to the Distribution Agreement, neither D&B, Cognizant nor
ACNielsen may take any action that would jeopardize the intended tax
consequences of the Distribution. Specifically, each of D&B, Cognizant and
ACNielsen agreed to maintain its status as a company engaged in the active
conduct of a trade or business, as defined in Section 355(b) of the Internal
Revenue Code, until the second anniversary of the Distribution Date. As part of
the request for a ruling that the Distribution be tax free for Federal income
tax purposes, ACNielsen represented to the Internal Revenue Service that,
subject to certain exceptions, it had no plan or intent to liquidate, merge or
sell all or substantially all of its assets. As a result, ACNielsen may not
initiate any action leading to a change of control as such action could result
in the foregoing representations, and the ruling based thereon, being called
into question. Accordingly, the acquisition of control of ACNielsen prior to the
second anniversary of the Distribution may be more difficult or less likely to
occur because of the potential substantial contractual damages associated with a
breach of such provisions of the Distribution Agreement.
Tax Allocation Agreement
D&B, Cognizant and ACNielsen entered into a Tax Allocation Agreement to
the effect that D&B will pay its entire consolidated tax liability for the tax
years that Cognizant and ACNielsen were included in D&B's consolidated Federal
income tax return. For periods prior to the Distribution Date, D&B will
generally be liable for state and local taxes measured by income or imposed in
lieu of income taxes. The Tax Allocation Agreement allocates liability to D&B,
Cognizant and ACNielsen for their respective shares of other state and local
taxes as well as any foreign taxes attributable to periods prior to the
Distribution Date, as well as certain other matters.
Employee Benefits Agreement
D&B, Cognizant and ACNielsen entered into an Employee Benefits
Agreement which allocates responsibility for certain employee benefits matters
on and after the Distribution Date.
Pursuant to the Employee Benefits Agreement (i) ACNielsen adopted a new
defined benefit pension plan for its U.S. employees, (ii) D&B is required to
continue to sponsor its plan for the benefit of its U.S. employees as well as
former employees who terminated employment on or prior to the Distribution Date
and (iii) assets and liabilities of the D&B pension plan that were attributable
to ACNielsen employees were transferred to the new ACNielsen plan.
Pursuant to the Employee Benefits Agreement, D&B is required to retain
the liability for all benefits under D&B's nonqualified supplemental pension
plans that were vested prior to the Distribution Date, but ACNielsen is required
to guarantee payment of these benefits to its employees in the event that D&B is
unable to satisfy its obligations.
D&B, Cognizant and ACNielsen each generally retain the severance
liabilities of their respective employees who terminated employment prior to the
Distribution Date.
Indemnity and Joint Defense Agreement
D&B, Cognizant and ACNielsen entered into the Indemnity and Joint
Defense Agreement pursuant to which they agreed (i) to certain arrangements
allocating potential liabilities ("IRI Liabilities") that may arise out of or in
connection with the IRI Action, as defined below in "Item 3, Legal Proceedings",
and (ii) to conduct a joint defense of such action.
In particular, the Indemnity and Joint Defense Agreement provides that
ACNielsen will assume exclusive liability for IRI Liabilities up to a maximum
amount to be determined 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
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ACN Maximum Amount will be determined by an investment banking firm as the
maximum amount which ACNielsen 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 ACNielsen 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
ACNielsen, 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.
In addition, ACNielsen agreed to certain restrictions on payments of
dividends and share repurchases above specified levels. ACNielsen also agreed
not to engage in mergers, acquisitions or dispositions, including joint venture
investments, if, after giving effect to any such transaction, ACNielsen would be
unable to meet a specified fixed charge coverage ratio, and, if any such
transaction involves aggregate consideration in excess of $50 million, then
ACNielsen is also required to receive and to cause to be delivered to Cognizant
and D&B an investment banker's fairness opinion.
The Indemnity and Joint Defense Agreement also sets forth certain
provisions governing the defense of the IRI Action pursuant to which the parties
agree to be represented by the same counsel. Legal expenses are to be shared
equally by the three parties.
TAM Master Agreement
Cognizant and ACNielsen entered into the TAM Master Agreement relating
to the conduct of the television audience measurement business (the "TAM
Business").
Pursuant to the TAM Master Agreement and certain ancillary trademark
and technology licensing agreements (together with the TAM Master Agreement, the
"TAM Agreement"), Cognizant or a newly established entity is required to license
to ACNielsen (i) a non-exclusive right to use certain trademarks in connection
with the TAM Business outside the United States and Canada for five years and
(ii) a non-exclusive right to use specified technology in Australia, Ireland and
India in connection with the TAM Business for five years or such longer period
as is required to fulfill contractual obligations existing on the Distribution
Date.
In the event that on or prior to the third anniversary of the
Distribution Date, ACNielsen determines to sell all or substantially all of (i)
its assets or the assets of the TAM Business (as defined in the TAM Master
Agreement), or (ii) its assets that generate more than 50% of the TAM Business,
or ACNielsen takes action to be acquired or is acquired by a third party,
Cognizant will have the right to require ACNielsen to sell all of ACNielsen's
TAM Business to Cognizant at the book value thereof (as calculated in accordance
with the TAM Master Agreement) plus certain transfer costs. In addition, in the
event that prior to the third anniversary of the Distribution Date, ACNielsen
determines to sell all or substantially all of its TAM Business in a particular
country, Cognizant will have the right to require ACNielsen to sell such
business to Cognizant at the book value thereof (as calculated in accordance
with the TAM Master Agreement) plus certain transfer costs.
Intellectual Property Agreement
D&B, Cognizant and ACNielsen entered into an Intellectual Property
Agreement (the "IP Agreement") providing for the allocation and recognition by
and among these companies of rights under patents, copyrights, software,
technology, trade secrets and certain other intellectual property owned by D&B,
Cognizant or ACNielsen and their respective subsidiaries as of the Distribution
Date. The IP Agreement also contains various provisions governing the future use
of certain trademarks owned by ACNielsen prior to the Distribution Date,
including limitations upon both Cognizant's and ACNielsen's use of the "Nielsen"
name, standing alone or as part of a name describing any new product or service
to be offered. (See Item 1- "Intellectual Property.")
Competition
ACNielsen has numerous competitors in its various lines of business
throughout the world. Some are companies with diverse product and service lines;
others have more limited product and service offerings. Competition comes from
companies specializing in marketing research; the in-house research departments
of manufacturers and advertising agencies; retailers selling information
directly or through brokers; information management and software companies; and
consulting and accounting firms.
In Retail Measurement Services, ACNielsen's principal competitor in the
United States is Information Resources, Inc. (IRI). IRI is also active in
Canada, Europe and Latin America by itself and through joint ventures with GFK
(Germany), Taylor Nelson AGB/Sofres in Europe and other companies, and is
expanding globally.
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In Customized Research Services, a significant competitor is Kantar,
the marketing research arm of WPP Group Plc., which operates globally through
BMRB International, Millward Brown International and Research International.
In Media Measurement Services, significant competitors include Taylor
Nelson AGB/Sofres, GFK, AGBItalia, and Video Research (Japan).
In Consumer Panel Services, significant competitors include NPD,
operating in North America, and the Europanel consortium, which includes Taylor
Nelson AGB/Sofres and GFK, operating in Europe. IRI also competes in this area.
Principal competitive factors include innovation, the quality,
reliability and comprehensivesness of analytical services and data, flexibility
in tailoring services to client needs, price, and geographical and market
coverage.
Foreign Operations
As indicated above, ACNielsen engages in a significant portion of its
business outside of the United States, with more than 75% of its revenues in
1997 being generated through non-U.S. sources. ACNielsen's foreign operations
are subject to the usual risks inherent in carrying on business outside the
United States, including fluctuations in relative currency values, possible
nationalization, expropriation, price controls or other restrictive government
actions. ACNielsen believes that the risk of nationalization or expropriation is
reduced because its products are services and information, rather than products
which require manufacturing facilities or the use of natural resources.
Intellectual Property
ACNielsen owns and controls trade secrets, confidential information,
trademarks, trade names, copyrights and other intellectual property rights
which, in the aggregate, are of material importance to ACNielsen's business.
Management of ACNielsen believes that the "ACNielsen" name and related names,
marks and logos are of material importance to ACNielsen. ACNielsen is licensed
to use certain technology and other intellectual property rights owned and
controlled by others, and, similarly, other companies are licensed to use
certain technology and other intellectual property rights owned and controlled
by ACNielsen.
Pursuant to the Intellectual Property (IP) Agreement among D&B,
Cognizant and ACNielsen, ACNielsen has exclusive rights to the use of the
"ACNielsen" name worldwide; however, ACNielsen's future use of the "Nielsen"
name standing alone is prohibited and, as a part of a name describing new
products and services to be offered, is subject to certain limitations. In
addition, the IP Agreement also provided for the establishment of a new entity,
jointly owned by Cognizant and ACNielsen, into which certain trademarks
incorporating or relating to the "Nielsen" name in various countries were
assigned. This entity is obligated to license such trademarks on a royalty-free
basis to Cognizant or ACNielsen for use in a manner consistent with the terms of
the IP Agreement and for purposes of conducting their respective businesses
after the Distribution, and is responsible for preserving the quality of those
trademarks and minimizing any risk of possible confusion. Pursuant to the TAM
Agreement, Cognizant is required to grant ACNielsen a non-exclusive right to use
certain trademarks and technology, as described in "TAM Master Agreement" above.
ACNielsen shall not be licensed to use any such trademarks or technology in
connection with the conduct of the TAM Business within the United States or
Canada.
The technology and other intellectual property rights licensed by
ACNielsen are important to its business, although management of ACNielsen
believes that ACNielsen's business, as a whole, is not dependent upon any one
intellectual property or group of such properties.
The names of ACNielsen's products and services referred to herein are
registered or unregistered trademarks or service marks owned by or licensed to
ACNielsen or its subsidiaries.
Forward-Looking Statements
The Company may from time to time make oral forward-looking statements.
In connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, the Company is hereby identifying important
factors that could cause actual results to differ materially from those
contained in any forward-looking statement made by or on behalf of the Company.
Any such statement is qualified by reference to the following cautionary
statements.
The Company is currently implementing a turnaround strategy, the
success of which depends in large part on the Company's ability to collect,
process and deliver data in a timely, cost-effective and high quality manner;
reduce costs and improve productivity; and integrate and centralize various
foreign operations. Data collection is largely dependent on the availability of
retail sources that are willing to sell the data to the Company at prices
acceptable to the Company. In addition, the Company operates in highly
competitive markets and its businesses are subject to changes in general
economic conditions which impact the Company's clients' demand for the Company's
services; significant price and service competition; rapid technological
developments in the collection,
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manipulation and delivery of information; the impact of foreign exchange
rate fluctuations since so much of the Company's earnings are generated
abroad; the degree of acceptance of new product introductions; and the
uncertainties of litigation, including the IRI Action; as well as other
risks and uncertainties detailed from time to time in the Company's
Securities and Exchange Commission filings. Developments in any of these
areas could cause the Company's results to differ from results that have
been or may be projected by or on behalf of the Company. The Company cautions
that the foregoing list of important factors is not exclusive. The Company does
not undertake to update any forward-looking statement that may be made from time
to time by or on behalf of the Company.
Financial Information about Industry Segments
As stated above, the Company operates in one industry segment, Market Research,
Information and Analysis Services.
Financial Information about Foreign and Domestic Operations and Export Sales
The response to item 101(d) of Regulation S-K is incorporated herein by
reference to Note 17 Operations by Geographic Area on Page 54 of the 1997 Annual
Report.
ITEM 2. PROPERTIES
ACNielsen's real properties are geographically distributed to meet
sales and operating requirements worldwide. Most of ACNielsen's properties are
leased from third parties, including D&B and Cognizant. ACNielsen's properties
are generally considered to be both suitable and adequate to meet current
operating requirements and virtually all space is being utilized.
ITEM 3. LEGAL PROCEEDINGS
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, "ACNielsenCo") 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: (1) a violation of Section 1 of the Sherman Act through an alleged
practice of tying ACNielsenCo services in different countries or of ACNielsenCo
and IMS services; (2) a violation of Section 1 of the Sherman Act through
alleged unreasonable restraints of trade consisting of the contracts described
above and through alleged long-term agreements with multi-national customers;
(3) a violation of Section 2 of the Sherman Act for monopolization and attempted
monopolization of export markets through alleged exclusive data acquisition
agreements with retailers in foreign countries, the contracts with customers
described above, and other means; (4) a violation of Section 2 of the Sherman
Act for attempted monopolization of the United States market through the alleged
exclusive data agreements described above, predatory pricing, and other means;
and (5) a violation of Section 2 of the Sherman Act for an alleged use of market
power in export markets to gain an unfair competitive advantage in the United
States.
The complaint also alleges two claims of tortious interference with
contract and 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 defendants and that 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. On
June 3, 1997, defendants filed an answer and counterclaims. Defendants denied
all material allegations of the complaint. In addition, ACNielsenCo asserted
counterclaims against IRI alleging that IRI has made false and misleading
statements about ACNielsenCo's services and commercial activities and that such
conduct constitutes a violation of Section 43(a) of the Lanham Act and unfair
competition. ACNielsenCo seeks injunctive relief and damages.
8
<PAGE>
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. On December 1,
1997, the Court denied defendants' motion.
In connection with such action, D&B, Cognizant (the parent company of
IMS) and the Company have entered into the Indemnity and Joint Defense Agreement
described in "Item 1, Indemnity and Joint Defense Agreement".
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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
Executive officers are elected by the Board of Directors to hold office
at the pleasure of the Board of Directors.
Listed below are the executive officers of the registrant at March 1,
1998 and brief summaries of their business experience during the past five
years.
Name Title Age
Nicholas L. Trivisonno Chairman and Chief Executive Officer* 50
Robert J Lievense President and Chief Operating Officer* 52
Michael P. Connors Vice Chairman* 42
Earl H. Doppelt Executive Vice President and General Counsel 44
Robert J. Chrenc Executive Vice President and Chief Financial Officer 53
*Member of the Board of Directors.
Mr. Trivisonno was elected Chairman and Chief Executive Officer of
ACNielsen, effective May 1996; he served as Executive Vice President-Finance and
Chief Financial Officer of D&B (business information), effective September 1995
through November 1, 1996. Prior thereto, he had served with GTE Corporation
(telecommunications) as Executive Vice President-Strategic Planning and Group
President, effective October 1993 through July 1995, and as Senior Vice
President-Finance, effective January 1989. He also served as a director of GTE
Corporation from April 1995 through July 1995.
Mr. Lievense was elected President and Chief Operating Officer of
ACNielsen, effective May 1996; he served as Executive Vice President of D&B
(business information), effective February 1995 through November 1, 1996. He had
been elected Senior Vice President of D&B, effective July 1993. Previously he
had served as Chairman of Dataquest Incorporated (technology information),
effective September 1991 through July 1993 and as President of NCH Promotional
Services, Inc. (coupon processing), effective August 1990 through July 1993.
9
<PAGE>
Mr. Connors was elected Vice Chairman of ACNielsen, effective May 1996;
he served as Senior Vice President of D&B (business information), effective
April 1995 through November 1, 1996. Prior thereto, he had served as Senior Vice
President of American Express Travel Related Services (travel and financial
services), effective September 1989 through March 1995.
Mr. Doppelt was elected Executive Vice President and General Counsel of
ACNielsen, effective May 1996; he had served as Senior Vice President and
General Counsel of D&B, effective May 1994 through November 1, 1996. Prior
thereto, he had served with Viacom Inc. (global entertainment) as Senior Vice
President and Deputy General Counsel, effective March 1994, and with Paramount
Communications Inc. (global entertainment), as Senior Vice President and Deputy
General Counsel, effective September 1992.
Mr. Chrenc was elected Executive Vice President and Chief Financial
Officer of ACNielsen, effective June 1996. Prior thereto he was a Partner of
Arthur Andersen LLP (accounting), effective September 1979 through May 1996.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Information in response to this Item is set forth under Dividends and
Common Stock Information in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" on Page 37 of the 1997 Annual Report, which
information is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
Selected financial data required by this Item are incorporated herein
by reference to the information relating to the years 1993 through 1997 set
forth in "Summary Financial Data" on Page 56 of the 1997 Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Information in response to this Item is set forth in "Management's
Discussion and Analysis of Financial Condition and Results of Operations" on
Pages 33 to 37 of the 1997 Annual Report, which information is incorporated
herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Financial Statements and Schedule under Item 14 on
Page 13.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information in response to this Item is incorporated herein by
reference to the sections entitled "Election of Directors" and "Section 16(a)
Beneficial Ownership Reporting Compliance" in the Company's proxy statement
dated March 13, 1998 filed with the Securities and Exchange Commission, except
that "Executive Officers of the Registrant" on Page 9 of this report responds to
Item 401(b) and (e) of Regulation S-K with respect to the Company's executive
officers.
10
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
Information in response to this Item is incorporated herein by
reference to the section entitled "Compensation of Executive Officers and
Directors" in the Company's proxy statement dated March 13, 1998 filed with the
Securities and Exchange Commission.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information in response to this Item is incorporated herein by
reference to the section entitled "Security Ownership of Management and Others"
in the Company's proxy statement dated March 13, 1998 filed with the Securities
and Exchange Commission.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) List of documents filed as part of this report.
(1) Financial Statements.
See Index to Financial Statements and Schedule on
Page 13.
(2) Financial Statement Schedule.
See Index to Financial Statements and Schedule on
Page 13.
(3) Other Financial Information.
Summary Financial Data. See Index to Financial
Statements and Schedule on Page 13.
(4) Exhibits.
See Index to Exhibits on Pages 18 to 20, which
indicates which Exhibits are management contracts or
compensatory plans required to be filed as Exhibits.
Only responsive information appearing on Pages 33 to
56 to Exhibit 13 is incorporated herein by reference,
and no other information appearing in Exhibit 13 is
or shall be deemed to be filed as part of this Form
10-K.
(b) Reports on Form 8-K.
None.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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)
By: /s/ ROBERT J. CHRENC
--------------------------------------
Robert J. Chrenc
(Executive Vice President and Chief
Financial Officer)
Date: March 26, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
/s/ NICHOLAS L. TRIVISONNO KAREN L. HENDRICKS*
- - ----------------------------------------- -------------------------------------
Nicholas L. Trivisonno (Karen L. Hendricks, Director)
(Chairman, Chief Executive Officer
and Director)
(Principal Executive Officer)
/s/ ROBERT J. CHRENC ROBERT M. HENDRICKSON*
- - ----------------------------------------- -------------------------------------
Robert J. Chrenc (Robert M. Hendrickson, Director
(Executive Vice President and Chief
Financial Officer)
(Principal Financial and Accounting Officer)
/s/ MICHAEL S. GELTZEILER ROBERT HOLLAND, JR.*
- - ----------------------------------------- -------------------------------------
Michael S. Geltzeiler (Robert Holland, Jr., Director)
(Senior Vice President and Controller)
ROBERT H. BEEBY* ROBERT J LIEVENSE*
- - ----------------------------------------- -------------------------------------
(Robert H. Beeby, Director) (Robert J Lievense, Director)
MICHAEL P. CONNORS* JOHN R. MEYER*
- - ----------------------------------------- -------------------------------------
(Michael P. Connors, Director) (John R. Meyer, Director)
DONALD W. GRIFFIN* BRIAN B. PEMBERTON*
- - ----------------------------------------- -------------------------------------
(Donald W. Griffin, Director) (Brian B. Pemberton, Director)
THOMAS C. HAYS* ROBERT N. THURSTON*
- - ----------------------------------------- -------------------------------------
(Thomas C. Hays, Director) (Robert N. Thurston, Director)
*By: /s/ Ellenore O'Hanrahan
-----------------------------------------
(Ellenore O'Hanrahan, attorney-in-fact)
Date: March 26, 1998
12
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
FINANCIAL STATEMENTS:
The Company's consolidated financial statements, the notes thereto and
the related report thereon of Arthur Andersen LLP, independent public
accountants, for the year ended December 31, 1997 appearing on Pages 38 to 56 of
the 1997 Annual Report, are incorporated by reference into this Annual Report on
Form 10-K (see below). The additional financial data indicated below should be
read in conjunction with such consolidated financial statements.
Page
--------------------------
10-K 1997 Annual
Report
------------ ------------
Report of Independent Public Accountants............. F-6 38
Statement of Management Responsibility
for Financial Statements........................... F-6 38
As of December 31, 1997 and 1996:
Consolidated Balance Sheets........................ F-8 40
For the years ended December 31, 1997, 1996 and 1995:
Consolidated Statements of Operations.............. F-7 39
Consolidated Statements of Cash Flows.............. F-9 41
Consolidated Statements of Shareholders'Equity..... F-10 42
Notes to Consolidated Financial Statements......... F-11 43
Quarterly Financial Data (Unaudited) for the years ended
December 31, 1997 and 1996......................... F-23 55
Management's Discussion and Analysis of Financial
Condition and Results of Operations................ F-1 33
Other financial information:
Five-year selected financial data.................. F-24 56
SCHEDULE:
Reports of Independent Public Accountants.......... 14-16
ACNielsen Corporation and Subsidiaries:
II-Valuation and Qualifying Accounts for the years ended
December 31, 1997, 1996 and 1995................. 17
Schedules other than the one listed above are omitted as not required
or inapplicable or because the required information is provided in the
consolidated financial statements, including the notes thereto.
13
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To the Shareholders and Board of Directors of ACNielsen Corporation:
We have audited in accordance with generally accepted auditing
standards, the 1997 and 1996 consolidated financial statements included
in ACNielsen Corporation's 1997 Annual Report incorporated by reference in
this Form 10-K, and have issued our report thereon dated February 18, 1998. Our
audit was made for the purpose of forming an opinion on those statements
taken as a whole. The 1997 and 1996 schedule listed in the accompanying
index is the responsibility of the Company's management and is presented
for purposes of complying with the Securities and Exchange Commission's rules
and is not part of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, fairly states in all material
respects the financial data required to be set forth therein in relation to the
basic financial statements taken as a whole.
/s/ ARTHUR ANDERSEN LLP
Stamford, Connecticut
February 18, 1998
14
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of ACNielsen Corporation:
We have audited the combined statements of operations, cash flows and
shareholders' equity of ACNielsen Corporation, as defined in the notes to the
financial statements, for the year ended December 31, 1995, as listed in the
Index to Financial Statements on page 13 of this Form 10-K. These combined
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement . An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and the significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above
present fairly, in all material respects, the results of operations and cash
flows of ACNielsen Corporation for the year ended December 31, 1995 in
conformity with generally accepted accounting principles.
As discussed in the notes to the financial statements, in 1995 the
Company changed its method of accounting for the impairment of long-lived
assets.
/s/ COOPERS & LYBRAND L.L.P.
Stamford, Connecticut
September 16, 1996
15
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of ACNielsen Corporation:
Our report on the combined statements of operations, cash flows and
shareholders' equity of ACNielsen Corporation, as defined in the notes to the
financial statements, for the year ended December 31, 1995, is included on page
15 of this Form 10-K. In connection with our audit of such financial statements,
we have also audited the related financial statement schedule for the year ended
December 31, 1995, set forth on page 18 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
/s/ COOPERS & LYBRAND L.L.P.
Stamford, Connecticut
September 16, 1996
16
<PAGE>
<TABLE>
SCHEDULE II
ACNIELSEN CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS for the years
ended December 31, 1997, 1996, 1995
(In thousands)
- - ---------------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E
- - ---------------------------------------------------------------------------------------------------------------------
Balance Additions Balance
Beginning Charged to at End
Description of Period Operations(a) Deductions(b) of Period
----------- --------- ------------- ------------- ---------
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
<CAPTION>
<S> <C> <C> <C> <C>
For the Year Ended December 31, 1997 $10,847 $ 2,330 $ 1,063 $12,114
======= ======= ======== =======
For the Year Ended December 31, 1996 $ 17,289 $ 3,853 $10,295 $10,847
======== ======= ======== =======
For the Year Ended December 31, 1995 $ 8,077 $10,523 $ 1,311 $17,289
======== ======= ======== =======
<FN>
NOTE:
(a) The increase in additions in 1995 is substantially attributable to bad debts in Europe.
(b) Represents primarily the charge-off of uncollectible accounts for which a reserve was provided.
</FN>
</TABLE>
17
<PAGE>
INDEX TO EXHIBITS
Exhibit Number
Regulation S-K Description
Articles of Incorporation and By-laws.
3
(a) Restated Certificate of Incorporation of *
the Company dated October 7, 1996
(incorporated herein by reference to
Exhibit 3.1 to the Company's Registration
Statement on Form 10, Commission File No.
001-12277 (the "Form 10")).
(b) Amended and Restated By-laws of the Company *
(incorporated herein by reference to
Exhibit 3.2 to the Form 10).
4 Instruments Defining the Rights of Security Holders,
Including Indentures.
(a) Rights Agreement dated as of October 17, *
1996 between ACNielsen Corporation and
First Chicago Trust Company of New York
(incorporated herein by reference to Exhibit 1 to
the Company's Form 8-A filed on October 18,
1996, Commission File No. 001-12277).
(b) ACNielsen Corporation $125,000,000 Credit *
Agreement dated as of December 19, 1996
(incorporated herein by reference to
Exhibit 4 to the Company's Annual Report on
Form 10-K for the fiscal year ended
December 31, 1996, Commission File No.
001-12277, (the "1996 Form 10-K")).
(c) First Amendment dated as of July 1, 1997 to *
the ACNielsen Corporation $125,000,000
Credit Agreement dated as of December 19,
1996 (incorporated herein by reference to
Exhibit 4 to the Company's Quarterly Report
on Form 10-Q for the quarterly period ended
September 30, 1997, Commission File No.
001-12277).
10 Material Contracts. (All of the following documents,
except for items (a) through (f), are management
contracts or compensatory plans or arrangements
required to be filed pursuant to Item 14(c).)
(a) Distribution Agreement dated as of October 28, *
1996 among The Dun & Bradstreet Corporation,
Cognizant Corporation and ACNielsen Corporation
(incorporated herein by reference to
Exhibit 10(a) to the 1996 Form 10-K).
(b) Tax Allocation Agreement dated as of October 28,*
1996 among The Dun & Bradstreet Corporation,
Cognizant Corporation and ACNielsen Corporation
(incorporated herein by reference to
Exhibit 10(b) to the 1996 Form 10-K).
(c) Employee Benefits Agreement dated as of *
October 28, 1996 among The Dun & Bradstreet
Corporation, Cognizant Corporation and ACNielsen
Corporation (incorporated herein by reference to
Exhibit 10(c) to the 1996 Form 10-K).
(d) Intellectual Property Agreement dated as of *
October 28, 1996 among The Dun & Bradstreet
Corporation, Cognizant Corporation and ACNielsen
Corporation (incorporated herein by reference to
Exhibit 10(d) to the 1996 Form 10-K).
+This exhibit constitutes a management contract, compensatory plan, or
arrangement.
*Incorporated herein by reference to a previously filed document.
18
<PAGE>
Exhibit Number
Regulation S-K Description
(e) TAM Master Agreement dated as of October 28, *
1996 between Cognizant Corporation and ACNielsen
Corporation (incorporated herein by reference
to Exhibit 10(e) to the 1996 Form 10-K).
(f) Indemnity and Joint Defense Agreement dated *
as of October 28,1996 among The Dun & Bradstreet
Corporation, Cognizant Corporation and ACNielsen
Corporation (incorporated herein by reference
to Exhibit 10(f) to the 1996 Form 10-K).
(g) 1996 ACNielsen Corporation Non-Employee +*
Directors' Stock Incentive Plan (incorporated
herein by reference to Exhibit 10(g) to the 1996
Form 10-K).
(h) 1996 ACNielsen Corporation Non-Employee +*
Directors' Deferred Compensation Plan
(incorporated herein by reference to
Exhibit 10(h) to the 1996 Form 10-K).
(i) 1996 ACNielsen Corporation Key Employees' +*
Stock Incentive Plan (incorporated herein by
reference to Exhibit 10(i) to the Company's
Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 1997, Commission File
No. 001-12277).
(j) 1996 ACNielsen Corporation Replacement Plan +*
for Certain Employees Holding The Dun &
Bradstreet Corporation Equity-Based Awards
(incorporated herein by reference to
Exhibit 10(j) to the 1996 Form 10-K).
(k) 1996 ACNielsen Corporation Senior Executive +*
Incentive Plan (incorporated herein by
reference to Exhibit 10(k) to the 1996 Form
10-K).
(l) 1996 ACNielsen Corporation Management +*
Incentive Bonus Plan (incorporated
herein by reference to Exhibit 10(l) to the
1996 Form 10-K).
(m) ACNielsen Corporation Supplemental Executive +*
Retirement Plan (incorporated herein by
reference to Exhibit 10(m) to the 1996 Form 10-K).
(n) ACNielsen Corporation Retirement Benefit +*
Excess Plan (incorporated herein by
reference to Exhibit 10(n) to the 1996 Form 10-K).
(o) ACNielsen Corporation Executive Transition +*
Plan (incorporated herein by reference
to Exhibit 10(o) to the 1996 Form 10-K).
(p) Form of Change-in-Control Agreements +*
(incorporated herein by reference to Exhibit
10(p) to the 1996 Form 10-K).
(q) Form of Option Agreement (incorporated herein +*
by reference to Exhibit 10(q) to the 1996
Form 10-K).
(r) Form of LSAR Agreement (incorporated herein +*
by reference to Exhibit 10(r) to the
1996 Form 10-K).
(s) Form of Directors' Restricted Stock +*
Agreement (incorporated herein by reference to
Exhibit 10(s) to the 1996 Form 10-K).
+This exhibit constitutes a management contract, compensatory plan, or
arrangement.
*Incorporated herein by reference to a previously filed document.
19
<PAGE>
Exhibit Number
Regulation S-K Description
11 Statement Re Computation of Per Share Earnings (filed
herewith).
Computation of Earnings Per Share of Common Stock
on a Diluted Basis
13 Annual Report to Security Holders (filed herewith).
1997 Annual Report
Only responsive information appearing on pages 33 to 56 to
Exhibit 13 is incorporated herein by reference, and no
other information appearing in Exhibit 13 is or shall be
deemed to be filed as part of this Form 10-K.
21 Subsidiaries of the Registrant (filed herewith).
List of Active Subsidiaries as of January 31, 1998
23 Consents of Experts and Counsel (filed herewith).
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Coopers & Lybrand L.L.P.
24 Power of Attorney (filed herewith).
Powers of Attorney dated February 19, 1998
27 Financial Data Schedule (filed herewith).
+This exhibit constitutes a management contract, compensatory plan, or
arrangement.
*Incorporated herein by reference to a previously filed document.
20
<TABLE>
EXHIBIT 11
ACNIELSEN CORPORATION
COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK
ON A DILUTED BASIS (a)
Dollar Amounts in Millions, Except Per Share Data 1997 1996 1995
<CAPTION>
(Average share data in thousands)
<S> <C> <C> <C>
Weighted-average number of common shares outstanding 57,139 56,712 56,507
Dilutive effect of shares issuable as of year-end under stock option plans 976 243 0
Adjustment of shares applicable to stock options and stock appreciation
rights exercised during the year 254 27 0
============== =============== =============
Weighted average number of shares on a diluted basis 58,369 56,982 56,507
============== =============== =============
============== =============== =============
Net Income (Loss) $35.9 $15.8 ($ 230.9)
============== =============== =============
============== =============== =============
Earnings (loss) per share of common stock on a diluted basis $.62 $.28 ($4.09)
============== =============== =============
(b)
<FN>
(a) All periods prior to November 1, 1996 reflect the adjusted share and option
activity of The Dun and Bradstreet Corporation
(b) No adjustment required as it would result in anti-dilution
</FN>
</TABLE>
EXHIBIT 13
ACNIELSEN CORPORATION
Management's Discussion and Analysis of Financial Condition and Results of
Operations
(Dollar amounts in thousands)
Year-ended December 31, 1997 Compared with Year-ended December 31, 1996
ACNielsen Corporation (ACNielsen or the Company) reported net income of $35,897
in 1997, more than double net income of $15,844 reported in 1996. Diluted
earnings per share in 1997 was $.62, up 121% from $.28 in 1996.
Revenue increased 2.4% in 1997 to $1,391,587 from $1,358,644 in 1996, reflecting
the negative impact of a strong U.S. dollar. Driven by growth in all regions,
revenue advanced 8.5% in local currency. Total Americas revenue increased 8.9%
to $514,015 from $472,038. Excluding the impact of currency translation, revenue
in the region grew 10.5%. In the United States, revenue grew 8.2% to $310,037,
on strong results in retail measurement services and consumer panel services.
Revenue for the Europe, Middle East & Africa ("EMEA") region was down slightly
to $579,050 as a result of the strong U.S. dollar. In local currency, the region
achieved a 6.6% gain in revenue reflecting growth in substantially all countries
in the region. Asia Pacific's revenue increased 4.2%, despite the devaluation of
several Southeast Asia currencies against the U.S. dollar, and grew 9.4% in
local currency.
Results for 1997 included a special pre-tax charge of $36,000 ($28,200
after-tax) and a pre-tax gain on sale of investments of $39,039 ($28,200
after-tax). The charge primarily reflected the costs to reduce workforce levels,
primarily in Japan, as well as consolidate facilities and rationalize certain
product lines in Japan and other Asia Pacific markets. It also included costs to
revalue certain assets in EMEA, Latin America and Asia Pacific. The plans were
designed to achieve long-term productivity improvements, rationalize the
Company's product lines and reduce costs in these regions. (See Notes 3 and 4 to
the Consolidated Financial Statements.)
ACNielsen reported operating income in 1997 of $24,756 compared with operating
income of $28,155 in 1996. Excluding the special charge, operating income
increased 115.8% to $60,756 from $28,155, reflecting the substantial increase in
U.S. operating income and improved results in Japan.
The Company reported operating costs of $749,385 in 1997, a slight increase from
$746,657 in 1996. Expense growth was held down by productivity improvements and
the impact of the strong U.S. dollar, offset by the inclusion in 1997 of
expenses of acquired companies.
Selling and administrative expenses of $488,588 were essentially flat, with
$490,658 reported in 1996, reflecting the favorable impact of currency
translation. Excluding the impact of foreign currency translation, selling and
administrative expenses increased about 6%.
ACNielsen reported other income--net of $43,788 compared with other income--net
of $2,339 in 1996. Other income--net included a $39,039 pre-tax gain from the
sale of investments. (See Note 4 to the Consolidated Financial Statements.)
Excluding this gain, other income--net increased $2,410, reflecting lower
interest rates on a lower level of borrowings.
The following discusses results on a geographic basis and excludes the 1997
special charge, as follows: $2,200 in Canada/Latin America, $4,000 in EMEA,
$7,500 in Asia Pacific, and $22,300 in ACNielsen Japan.
Total Americas revenue increased 8.9% in 1997 to $514,015 from $472,038 in 1996
and operating income increased 149.9% to $43,233 from $17,298. In the U.S.,
increased sales of account-level information and consumer panel services drove
an 8.2% increase in revenue. The higher revenue, coupled with improved operating
efficiency, produced $19,510 of operating income, compared with an operating
loss of $4,912 in 1996. In Canada/Latin America, revenue increased 10.0% to
$203,978 from $185,516, reflecting increased sales of retail measurement and
consumer panel services in Canada and strong retail measurement growth in
Brazil, Mexico and Colombia. Operating income increased 6.8% to $23,723 from
$22,210, despite a negative $1,735 impact from foreign currency translation.
[F-1]
<PAGE>
EMEA's revenue was down slightly to $579,050 in 1997 from $597,669 in 1996,
after absorbing a negative $58,124 currency translation impact. Excluding the
impact of the strong U.S. dollar, EMEA revenue increased 6.6%, reflecting nearly
40% growth in Eastern Europe and the addition of new revenue from Turkey, Israel
and South Africa. Operating income was $21,192 in 1997 compared with $21,828 in
1996, reflecting the adverse impact of foreign currency translation. Excluding
the impact of currency translation, operating income in the region grew 33.9%,
driven by strong income growth in Eastern Europe and improved results in the
United Kingdom and France.
Asia Pacific's revenue increased 4.2% to $264,652 in 1997, from $254,082 in
1996, but grew 9.4% in local currency, reflecting continued strong demand for
ACNielsen's market research services, particularly in Taiwan and Korea, and from
growth in the region's multi-country business. Operating income improved 45.5%
to $6,929 in 1997 from $4,762 in 1996, reflecting the region's continued focus
on client service, operating efficiency and profitability.
ACNielsen Japan's operating revenue decreased 2.8% to $33,870 in 1997 from
$34,855 in 1996, but increased 7.6%, excluding the effect of currency
translation. ACNielsen Japan's operating loss was reduced 32.6% to $10,598 in
1997 from a loss of $15,733 in 1996, due to higher volume, improved operating
efficiency and the favorable impact of currency translation on costs.
Year-ended December 31, 1996 Compared with Year-ended December 31, 1995
ACNielsen reported net income of $15,844 in 1996, compared with a net loss of
$230,884 in 1995. The loss in 1995 included a special pre-tax charge of $152,170
($141,260 after-tax) in the fourth quarter of 1995 for costs principally
associated with asset impairments, software write-offs and contractual
obligations that have no future economic benefit. (See Note 3 to the
Consolidated Financial Statements.) Results for 1995 also included a pre-tax
charge in the third quarter of $31,900 ($24,200 after-tax) for postemployment
benefits. Excluding the special charge and incremental provision for
postemployment benefits, ACNielsen's net income increased to $15,844 from a net
loss of $65,424 in 1995, reflecting solid improvement in the U.S. business as a
result of revenue growth, productivity improvements and other business
reengineering activities initiated in 1995.
Revenue increased 6.0% in 1996 to $1,358,644 from $1,281,345 in 1995, reflecting
continued strong revenue growth in the Asia Pacific and Canada/Latin America
regions. Growth in the U.S. of 4.4% was driven by new products and new
customers, primarily in retail measurement and consumer panel services. EMEA
reported modest revenue growth reflecting the impact of the stronger dollar.
Excluding the unfavorable impact of foreign currency translation, EMEA's revenue
increased 4.1%, as increased scanning capabilities drove favorable results in
modeling and analytical services and causal tracking services. Excluding the
effects of foreign currency translation, the Company's 1996 consolidated revenue
increased 7.7%.
ACNielsen reported operating income in 1996 of $28,155 compared with an
operating loss of $184,008 in 1995. The operating loss in 1995 reflected the
impact of the special charge and postemployment benefit provision. Excluding
these items in 1995, operating income increased $28,093 primarily reflecting
lower costs and higher revenue in the U.S. In EMEA, however, higher production
and other costs related to scanning transition issues resulted in a $14,373
decline in operating income in 1996 versus 1995, excluding the charges described
above. Operating income in Asia Pacific declined as well, excluding the special
items, reflecting costs associated with the expansion of the Company's business
infrastructure in China and other emerging markets.
Operating costs, excluding the special items described above, increased to
$746,657 in 1996 from $675,062 in 1995, reflecting higher costs associated with
geographic expansion in Asia Pacific and higher production and other costs
related to the scanning transition in EMEA, partially offset by lower expenses
in the U.S.
Selling and administrative expenses increased 0.7% to $490,658 in 1996 from
$486,992 in 1995. This increase resulted from higher expenses in Asia Pacific to
support expansion, offset in part by expense reductions in the U.S.
[F-2]
<PAGE>
ACNielsen reported other income--net of $2,339 in 1996 compared with other
expense--net of $7,040 in 1995, primarily reflecting reduced interest expense,
as a result of a lower level of short-term borrowings in Latin America and lower
foreign currency translation losses in highly inflationary countries.
The following discusses results on a geographic basis and excludes the following
1995 special charges: $107,000 in the U.S., $1,870 in Canada/Latin America,
$28,400 in EMEA, $900 in Asia Pacific and $14,000 in ACNielsen Japan; and
incremental provision for postemployment benefits: $16,500 in the U.S., $2,000
in Canada/Latin America, and $13,400 in EMEA.
Total Americas revenue increased 6.4% in 1996 to $472,038 from $443,561 in 1995,
and its operating income increased to $17,298 from an operating loss of $26,634,
almost entirely as a result of improvements in the U.S. business, including
substantial cost reductions. Revenue in the U.S. increased 4.4% to $286,522 in
1996 from $274,552 in 1995, reflecting increases in retail measurement and
consumer panel services, partially offset by lower sales in merchandising
services (services to retailers) as a result of increased competitive pressures.
The operating loss for the U.S. decreased to $4,912 in 1996 from an operating
loss of $49,471 in 1995, reflecting substantial productivity improvements from
workforce reductions and other reengineering actions, and lower depreciation and
amortization expense. In Canada/Latin America, revenue increased 9.8% to
$185,516 from $169,009; however, operating income of $22,210 in 1996 was
essentially flat compared with $22,837 in 1995, reflecting costs to install
television audience measurement services in Latin America.
EMEA's revenue increased 2.5% to $597,669 in 1996 from $583,269 in 1995. The
revenue increase reflected expanded sales of modeling and analytical services,
consumer panel services and causal information in the retail tracking business,
partially offset by the unfavorable effect of currency translation. Excluding
the effect of the stronger dollar, revenue growth for the region was 4.1%.
Operating income declined to $21,828 from $36,201 in 1995, reflecting expenses
incurred to improve customer service, data quality and delivery.
Asia Pacific's revenue increased 17.2% to $254,082 in 1996, from $216,875 in
1995, reflecting broad-based revenue gains in customized research, media
measurement and retail measurement services. Operating income, however, declined
to $4,762 from $12,595 in 1995, primarily due to higher costs associated with
geographic expansion in China and other new markets, integration costs
associated with acquisitions, particularly in Australia, and significant
competitive pressures and reduced margins in customized research in both
Australia and North Asia.
ACNielsen Japan's operating revenue decreased 7.4% to $34,855 in 1996 from
$37,640 in 1995, reflecting the unfavorable effect of currency translation.
Excluding the effect of currency translation, revenue increased 7.4% as new
revenue was added from retail scanning and beverage services. ACNielsen Japan
reported a lower operating loss of $15,733 in 1996, compared with a loss of
$22,100 in 1995, reflecting improved revenue, lower employee-related costs and
the impact of currency translation.
Income Taxes--The Company's income tax provision increased to $32,647 in 1997
from $14,650 in 1996. Excluding the impact on the tax provision of the special
charge and gains on sales of investments, the effective tax rate for 1997 was
45.2%, compared with 48.0% in 1996. The decrease in the effective tax rate
reflected the impact of tax planning strategies. In 1995, the Company did not
recognize benefits on U.S. losses since the Company did not believe it was more
likely than not that such benefits could be recognized on a separate-company
basis. In 1996, U.S. losses through the Distribution Date were realized by D&B,
and accordingly, the related tax benefit was reflected by the Company through
divisional equity. (See Note 9 to the Consolidated Financial Statements.)
[F-3]
<PAGE>
Non-U.S. Operating and Monetary Assets--ACNielsen operates globally. Nearly 80%
of ACNielsen's revenue was generated from non-U.S. operations during 1997 and
1996. During 1997, EMEA and Asia Pacific operations (including Japan)
contributed 42% and 21% of reported Company revenue, respectively. Primarily as
a result of these non-U.S. operations, changes in the value of local currencies
relative to the U.S. dollar may increase the volatility of the U.S. dollar
operating results. In addition, while the volatility in foreign currency markets
and interest rates in Southeast Asia has not significantly impacted the
Company's results during 1997, the difficult economic environment being
experienced by certain countries in that region could adversely affect the
Company's revenue in certain countries in the Asia Pacific region in the future.
In 1997, revenue generated in Southeast Asia accounted for approximately 6% of
the Company's consolidated revenue. In 1997 and 1996, foreign currency
translation decreased consolidated U.S. dollar revenue growth by approximately
6.1% and 1.7%, respectively. Operating income growth in 1997 was reduced by
approximately $11 million. The effect of such foreign currency fluctuations on
1996 operating income was not significant.
ACNielsen has entered into foreign exchange forward contracts to hedge against
significant known transactional exposures. (See Note 11 to the Consolidated
Financial Statements.)
Non-U.S. monetary assets are maintained in currencies other than the U.S.
dollar, principally in Canada, France, Spain, Australia and the United Kingdom.
Changes in the value of these currencies relative to the U.S. dollar are charged
or credited to shareholders' equity. In 1997, the economies of Brazil and
certain Eastern European countries were considered highly inflationary, and the
U.S. dollar was designated as the functional currency; therefore, translation
and transaction adjustments related to these countries were charged or credited
to other income (expense)--net. (See Note 2 to the Consolidated Financial
Statements.) In the first quarter of 1998, Brazil's operations will no longer be
considered highly inflationary. At December 31, 1997, monetary assets maintained
in countries in Southeast Asia were insignificant. The effect of exchange rate
changes decreased the U.S. dollar amount of cash and cash equivalents by $13,186
in 1997 and $6,387 in 1996.
Liquidity and Capital Resources--At December 31, 1997, cash and cash equivalents
totaled $205,726, an increase of $20,721 from December 31, 1996, and short-term
debt totaled $25,957, a decrease of $10,804 from December 31, 1996. The increase
in cash at December 31, 1997 reflected the receipt of $45,899 from the sale of
investments, offset by $30,184 paid for acquisition of businesses and $15,900
paid to settle certain pre-Distribution obligations, including non-U.S. income
and withholding taxes. In addition, cash payments in 1997 related to
postemployment benefit payments and other actions implemented in connection with
the 1995 special charge totaled $33,400. In 1998, the Company expects cash
outlays related to the 1997 special charge of $28,200. In addition, in December
1997, the Board of Directors authorized the Company to repurchase up to one
million shares of Company common stock from time to time on the open market.
Net cash provided by operating activities aggregated $93,870, $119,220 and
$21,465 in 1997, 1996 and 1995, respectively. The decrease in cash provided by
operating activities in 1997 reflected increased accounts receivable resulting
from increased local currency revenue and the payment of certain
pre-Distribution obligations for taxes and other items related to the
reorganization of D&B. The increase of $97,755 in net cash provided by operating
activities in 1996, compared with 1995, reflected improved collections of
accounts receivable, partially offset by higher non-U.S. taxes paid--net of
refunds ($34,242) and the payments related to the 1995 special charge ($30,711).
The increase in non-U.S. tax payments in 1996 is attributed to ACNielsen paying
certain non-U.S. taxes on behalf of D&B prior to the Distribution. Additionally,
cash provided by other working capital items in 1996 included the transfer from
D&B of pre-Distribution accruals for taxes and other items related to the
reorganization of D&B.
Net cash used in investing activities totaled $56,071 for 1997 compared with
$69,145 and $108,359 in 1996 and 1995, respectively. The decrease in cash usage
in 1997 of $13,074 reflected proceeds from sale of investments in excess of
amounts paid for business acquisitions of $15,715, and lower capital
expenditures and computer software expenditures. The decrease in cash usage in
1996 of $39,214 reflected lower capital expenditures, lower deferrals of project
costs (included in other investing) and lower payments for acquisition of
businesses, offset in part by an increase in purchased computer software.
[F-4]
<PAGE>
Capital expenditures totaled $48,427, $65,503 and $86,862 in 1997, 1996 and
1995, respectively. The lower level of capital expenditures in 1997 reflected
the Company's active asset management program. The high level of capital
expenditures during 1995 was attributable primarily to higher expenditures in
Asia related to SRG's operations (acquired during 1994) and the acquisition of a
building in Brazil.
Net cash (used in) provided by financing activities totaled ($3,892), $51,749
and $87,777 in 1997, 1996 and 1995, respectively. The transfers from D&B in 1996
included cash received in connection with the Distribution. A high level of
funding from D&B was required in 1995 to fund capital spending.
As a subsidiary of D&B, funding for ACNielsen's U.S. and most non-U.S.
operations was provided by internally generated funds and financing obtained
through D&B. ACNielsen now provides for its normal capital and operating
expenditure needs through internally generated funds and existing cash reserves.
In addition, the Company maintains relationships with a worldwide network of
banks and has secured a line of credit sufficient to meet ACNielsen's short-term
cash requirements. (See Note 10 to the Consolidated Financial Statements.)
Management believes that the combination of cash flows from operations and bank
credit lines, as well as existing cash and cash equivalents, are sufficient to
support the Company's long-term cash requirements.
Year 2000
The Company relies on software and related technologies in the operation of its
business. Based on a comprehensive assessment, the Company determined that it
will be required to modify or replace significant portions of its software so
that its computer systems will be Year 2000 compliant. The Company is utilizing
internal and external resources to execute its Year 2000 compliance program.
Third-party contract programmers have been retained, and are presently
renovating and testing software. Renovation of code is scheduled to be
substantially complete by year end 1998, with testing and implementation of new
programs to be completed by mid-1999. The Company currently believes that it
will be able to modify or replace its affected systems in a timely manner and
with no significant disruptions to its operations.
Preliminary estimates of the total Year 2000 compliance costs to be incurred
with respect to the affected systems approximate $15,000 to $20,000 over the
costs of normal software upgrades and replacements. Maintenance and 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 are
expected to be incurred primarily in 1998. The incremental costs incurred in
1997 related to Year 2000 were not significant.
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.
Dividends--The payment and level of cash dividends by ACNielsen is subject to
the discretion of the Board of Directors of ACNielsen and to the restrictions
imposed by the Indemnity and Joint Defense Agreement. (See Note 15 to the
Consolidated Financial Statements.) In addition, the bank credit agreement
prohibits the Company from paying cash dividends. ACNielsen has not paid cash
dividends since the Distribution and currently does not anticipate paying cash
dividends in the near future. Future dividend decisions will be based on, and
affected by, a number of factors, including the operating results and financial
requirements of ACNielsen, as well as restrictions under agreements. There can
be no assurance that any dividends will be declared or paid.
Common Stock Information--The Company's common stock (symbol ART) is listed on
the New York Stock Exchange. During the year ended December 31, 1997, and the
two months ended December 31, 1996, 45,113,800 and 23,986,600 shares were
traded, respectively. The number of shareholders of record at January 31, 1998
and 1997 were 9,676 and 11,372, respectively. The high and low prices per share
during the period the Company's stock traded "regular way" during 1996 were
$185/8 and $141/2. The following summarizes the high and low prices per share as
reported in the periods shown:
-----------------------
High Low
================================================================================
First Quarter $17 1/8 $14 5/8
Second Quarter $19 5/8 $14 1/8
Third Quarter $24 3/16 $19
Fourth Quarter $24 5/8 $21 15/16
================================================================================
[F-5]
<PAGE>
Report of Independent Public Accountants
To the Board of Directors and Shareholders of
ACNielsen Corporation:
We have audited the accompanying Consolidated Balance Sheets of ACNielsen
Corporation and its subsidiaries (a Delaware corporation) (the "Company") as of
December 31, 1997 and 1996, and the related Consolidated Statements of
Operations, Cash Flows and Shareholders' Equity for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. The financial statements of the Company for the year ended December
31, 1995, were audited by other auditors whose report dated September 16, 1996
expressed an unqualified opinion on those statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
December 31, 1997 and 1996, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Stamford, Connecticut
February 18, 1998
Management's Responsibility for Financial Statements
Management is responsible for the preparation, integrity and objectivity of the
consolidated financial statements and other financial information presented in
this report. The accompanying consolidated financial statements were prepared in
accordance with generally accepted accounting principles, applying certain
estimates and judgments as required.
ACNielsen's internal controls are designed to provide reasonable assurance as to
the integrity and reliability of the financial statements and to adequately
safeguard, verify and maintain accountability of assets. Such controls are based
on established written policies and procedures, are implemented by trained,
skilled personnel with an appropriate segregation of duties and are monitored
through a comprehensive internal audit program. These policies and procedures
prescribe that the Company and all its employees are to maintain the highest
ethical standards and that its business practices throughout the world are to be
conducted in a manner which is above reproach.
Arthur Andersen LLP, independent auditors, are retained to audit ACNielsen's
financial statements. Their accompanying report is based on audits conducted in
accordance with generally accepted auditing standards, which include the
consideration of the Company's internal controls to establish a basis for
reliance thereon in determining the nature, timing and extent of audit tests to
be applied.
The Board of Directors exercises its responsibility for these financial
statements through its Audit and Finance Committee, which consists entirely of
independent non-management Board members. The Audit and Finance Committee meets
periodically with the independent auditors and the internal auditors, both
privately and with management present, to review accounting, auditing, internal
controls and financial reporting matters.
/s/ Nicholas L. Trivisonno
Nicholas L. Trivisonno
Chairman and Chief Executive Officer
/s/ Robert J. Chrenc
Robert J. Chrenc
Executive Vice President and Chief Financial Officer
[F-6]
<PAGE>
ACNIELSEN CORPORATION
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------
(Amounts in thousands, except per share data) 1997 1996 1995
============================================================================================
<S> <C> <C> <C>
Operating Revenue $ 1,391,587 $ 1,358,644 $ 1,281,345
- - --------------------------------------------------------------------------------------------
Costs and Expenses:
Operating Costs 749,385 746,657 706,962
Selling and Administrative Expenses 488,588 490,658 486,992
Depreciation and Amortization 92,858 93,174 119,229
Special Charges 36,000 -- 152,170
- - --------------------------------------------------------------------------------------------
Total Costs and Expenses 1,366,831 1,330,489 1,465,353
- - --------------------------------------------------------------------------------------------
Operating Income (Loss) 24,756 28,155 (184,008)
- - --------------------------------------------------------------------------------------------
Interest Income 8,431 8,357 10,025
Interest Expense (3,180) (5,209) (14,735)
Gain on Sale of Investments 39,039 -- --
Other Expense--Net (502) (809) (2,330)
- - --------------------------------------------------------------------------------------------
Other Income (Expense)--Net 43,788 2,339 (7,040)
- - --------------------------------------------------------------------------------------------
Income (Loss) Before Provision for Income Taxes 68,544 30,494 (191,048)
Provision for Income Taxes 32,647 14,650 39,836
- - --------------------------------------------------------------------------------------------
Net Income (Loss) $ 35,897 $ 15,844 $ (230,884)
============================================================================================
Actual and Pro Forma Earnings (Loss)
Per Share of Common Stock:
Basic $ .63 $ .28 $ (4.09)
Diluted $ .62 $ .28 $ (4.09)
============================================================================================
Actual and Pro Forma
Weighted-Average Number of Shares Outstanding:
Basic 57,139 56,712 56,507
Diluted 58,369 56,982 56,507
============================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
[F-7]
<PAGE>
ACNIELSEN CORPORATION
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31,
--------------------------
(Dollar amounts in thousands) 1997 1996
=======================================================================================================
<S> <C> <C>
Assets
Current Assets
Cash and Cash Equivalents $ 205,726 $ 185,005
Accounts Receivable--Net 260,821 270,603
Other Current Assets 38,423 30,822
- - -------------------------------------------------------------------------------------------------------
Total Current Assets 504,970 486,430
- - -------------------------------------------------------------------------------------------------------
Marketable Securities and Other Investments 10,281 26,352
- - -------------------------------------------------------------------------------------------------------
Property, Plant and Equipment--Net 165,660 186,053
- - -------------------------------------------------------------------------------------------------------
Other Assets--Net
Prepaid Pension 57,425 46,743
Computer Software 25,288 37,858
Intangibles and Other Assets 55,001 48,610
Goodwill 220,483 204,022
- - -------------------------------------------------------------------------------------------------------
Total Other Assets--Net 358,197 337,233
- - -------------------------------------------------------------------------------------------------------
Total Assets $ 1,039,108 $ 1,036,068
=======================================================================================================
Liabilities and Shareholders' Equity
Current Liabilities
Accounts Payable $ 86,908 $ 84,680
Short-Term Debt 25,957 36,761
Accrued and Other Current Liabilities 313,864 260,606
Accrued Income Taxes 42,385 64,268
- - -------------------------------------------------------------------------------------------------------
Total Current Liabilities 469,114 446,315
- - -------------------------------------------------------------------------------------------------------
Postretirement and Postemployment Benefits 49,400 78,924
Deferred Income Taxes 27,609 32,523
Other Liabilities 32,881 24,360
- - -------------------------------------------------------------------------------------------------------
Total Liabilities 579,004 582,122
- - -------------------------------------------------------------------------------------------------------
Commitments and Contingencies
- - -------------------------------------------------------------------------------------------------------
Shareholders' Equity
Preferred Stock--par value $.01 per share, authorized--5,000,000 shares;
outstanding--none -- --
Common Stock--par value $.01 per share, authorized--150,000,000 shares;
issued--57,730,273 and 57,124,419 shares for 1997 and 1996, respectively 577 571
Series Common Stock--par value $.01 per share, authorized--
5,000,000 shares; issued--none -- --
Additional Paid-in Capital 471,493 461,193
Retained Earnings 43,620 7,723
Treasury Stock, at cost, 266,666 shares in 1997 and 1996 (3,966) (3,966)
Cumulative Translation Adjustment (51,620) (17,658)
Unrealized Gains on Investments--Net -- 6,083
- - -------------------------------------------------------------------------------------------------------
Total Shareholders' Equity 460,104 453,946
- - -------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $ 1,039,108 $ 1,036,068
=======================================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
[F-8]
<PAGE>
ACNIELSEN CORPORATION
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------
(Dollar amounts in thousands) 1997 1996 1995
=====================================================================================================
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net Income (Loss) $ 35,897 $ 15,844 $(230,884)
Reconciliation of Net Income (Loss) to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 92,858 93,174 119,229
Deferred Income Taxes 7,062 11,598 (15,603)
Restructuring Payments -- (45) (10,065)
Special Charges 36,000 -- 152,170
Payments Related to 1995 Special Charge (33,400) (30,711) --
Postemployment Benefit Expense 227 3,077 36,168
Postemployment Benefit Payments (15,495) (21,275) (50,290)
Net Increase in Accounts Receivable (10,609) (802) (32,461)
Gain on Sale of Investments (39,039) -- --
Net Decrease in Other Working Capital Items 28,249 58,682 54,489
Other (7,880) (10,322) (1,288)
- - -----------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 93,870 119,220 21,465
- - -----------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities:
Proceeds from Sale of Investments 45,899 -- --
Payments for Acquisition of Businesses (excluding cash and cash
equivalents acquired of $2,270 in 1997) (30,184) (946) (11,466)
Capital Expenditures (48,427) (65,503) (86,862)
Additions to Computer Software (14,774) (24,450) (20,535)
Decrease in Other Investments 289 2,530 2,199
Other (8,874) 19,224 8,305
- - -----------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities (56,071) (69,145) (108,359)
- - -----------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities:
Net Transfers from The Dun & Bradstreet Corporation -- 46,210 101,140
(Decrease) Increase in Short-Term Borrowings (9,718) 9,758 (11,731)
Treasury Stock Purchases -- (3,966) --
Proceeds from the Sale of Common Stock under Option Plans 5,700 1,335 --
Other 126 (1,588) (1,632)
- - -----------------------------------------------------------------------------------------------------
Net Cash (Used in) Provided by Financing Activities (3,892) 51,749 87,777
- - -----------------------------------------------------------------------------------------------------
Effect of Exchange Rate Changes on Cash and Cash Equivalents (13,186) (6,387) 3,649
- - -----------------------------------------------------------------------------------------------------
Increase in Cash and Cash Equivalents 20,721 95,437 4,532
Cash and Cash Equivalents, Beginning of Year 185,005 89,568 85,036
- - -----------------------------------------------------------------------------------------------------
Cash and Cash Equivalents, End of Year $ 205,726 $ 185,005 $ 89,568
=====================================================================================================
Supplemental Disclosure of Cash Flow Information:
Cash Paid During the Year for Interest $ 3,014 $ 5,272 $ 14,713
Cash Paid During the Year for Income Taxes $ 42,101 $ 57,736 $ 19,882
=====================================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
[F-9]
<PAGE>
ACNIELSEN CORPORATION
Consolidated Statements of Shareholders' Equity
<TABLE>
<CAPTION>
Treasury Stock,
Common Stock Additional at Cost Cumulative
(Dollar amounts in thousands) Divisional -------------------- Paid-in Retained ------------------- Translation
Three Years Ended December 31, 1997 Equity Shares Amount Capital Earnings Shares Amount Adjustment
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1995 $ 535,842 $(36,443)
Net Loss (230,884)
Unrealized Loss
Net Transfers from The Dun &
Bradstreet Corporation 101,140
Cumulative Translation
Adjustment 10,161
- - ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995 406,098 (26,282)
Net Income for period ended
October 31, 1996 8,121
Unrealized Gain
Net Transfers from The Dun &
Bradstreet Corporation 46,210
Cumulative Translation
Adjustment 4,526
Stock Distribution to Holders
of Dun & Bradstreet Stock (460,429) 57,019,180 $570 $459,859
- - ------------------------------------------------------------------------------------------------------------------------------------
Balance, November 1, 1996 57,019,180 570 459,859 (21,756)
Net Income for period ended
December 31, 1996 $ 7,723
Treasury Stock Purchased 266,666 $(3,966)
Unrealized Loss
Activity under Stock Plans
including Tax Benefits 105,239 1 1,334
Cumulative Translation
Adjustment 4,098
- - ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 57,124,419 571 461,193 7,723 266,666 (3,966) (17,658)
Net Income 35,897
Realized Gain
Activity under Stock Plans
including Tax Benefits 605,854 6 10,300
Cumulative Translation
Adjustment (33,962)
- - ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 57,730,273 $577 $471,493 $43,620 266,666 $(3,966) $(51,620)
====================================================================================================================================
</TABLE>
Unrealized
(Dollar amounts in thousands) Gains (Losses) Total
Three Years Ended December 31, 1997 on Investments Equity
===================================================================
Balance, January 1, 1995 $ (964) $ 498,435
Net Loss (230,884)
Unrealized Loss (1,321) (1,321)
Net Transfers from The Dun &
Bradstreet Corporation 101,140
Cumulative Translation
Adjustment 10,161
- - -------------------------------------------------------------------
Balance, December 31, 1995 (2,285) 377,531
Net Income for period ended
October 31, 1996 8,121
Unrealized Gain 9,324 9,324
Net Transfers from The Dun &
Bradstreet Corporation 46,210
Cumulative Translation
Adjustment 4,526
Stock Distribution to Holders
of Dun & Bradstreet Stock
- - -------------------------------------------------------------------
Balance, November 1, 1996 7,039 445,712
Net Income for period ended
December 31, 1996 7,723
Treasury Stock Purchased (3,966)
Unrealized Loss (956) (956)
Activity under Stock Plans
including Tax Benefits 1,335
Cumulative Translation
Adjustment 4,098
- - -------------------------------------------------------------------
Balance, December 31, 1996 6,083 453,946
Net Income 35,897
Realized Gain (6,083) (6,083)
Activity under Stock Plans
including Tax Benefits 10,306
Cumulative Translation
Adjustment (33,962)
- - -------------------------------------------------------------------
Balance, December 31, 1997 $ 460,104
===================================================================
The accompanying notes are an integral part of the consolidated financial
statements.
[F10]
<PAGE>
ACNIELSEN CORPORATION
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
Note 1. Basis of Presentation
Effective on November 1, 1996 (the Distribution Date), ACNielsen Corporation
(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). Prior to the Distribution, the Company was formed as a
wholly-owned subsidiary of D&B for the purpose of effecting the Distribution.
Included in this transaction was the transfer of the former D&B businesses and
operations that now comprise the Company, and substantially all of the assets
and liabilities of such businesses. For purposes of these financial statements,
all references to the Company include the assets and liabilities related to the
businesses that were transferred to the Company prior to the Distribution.
The Balance Sheets, as of December 31, 1997 and 1996, and the Statement of
Operations for the year ended December 31, 1997, are presented on a consolidated
basis. The Statement of Operations for the year ended December 31, 1996,
includes the combined results of operations of the ACNielsen businesses under
D&B for the ten months prior to the Distribution Date and the consolidated
results of operations of the Company for the two month period ended December 31,
1996. The 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 (see Note 2 to the Consolidated Financial Statements).
The financial statements generally reflect the financial position, results of
operations, and cash flows of the Company as if it were a separate entity for
all periods presented. The financial statements prior to the Distribution
include allocations of certain D&B Corporate assets (including prepaid pension
assets) and liabilities (including pension and postretirement benefits), and
expenses (including cash management, legal, accounting, tax, employee benefits,
insurance services, data services and other D&B Corporate overhead) 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 financial position,
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.
For purposes of governing certain of the ongoing relationships between the
Company, D&B and Cognizant Corporation (Cognizant, another corporation spun off
by D&B) after the Distribution and to provide for orderly transition, the
Company, D&B and Cognizant entered into various agreements including a
Distribution Agreement, Employee Benefits Agreement, Tax Allocation Agreement,
Indemnity and Joint Defense Agreement, TAM (Television Audience Measurement)
Master Agreement, Shared Transaction Services Agreements, Intellectual Property
Agreement, Transition Services Agreement and Data Services Agreements.
Note 2. Summary of Significant Accounting Policies
Principles of Consolidation. Investments in companies over which the Company has
significant influence but not a controlling interest are carried at equity. The
effects of all significant intercompany transactions have been eliminated. The
financial statements of subsidiaries outside the United States and Canada
reflect a fiscal year ending November 30 to facilitate timely reporting of the
Company's financial results.
Cash Equivalents and Marketable Securities. Investments that are highly liquid
and mature within 90 days of purchase date are considered cash equivalents. At
December 31, 1997 and 1996, all marketable securities are classified as
"available for sale" and therefore are reported at fair value, with net
unrealized gains and losses reported in equity.
Property, Plant and Equipment. Buildings, computer hardware and other equipment
are depreciated over their estimated useful lives using principally the
straight-line method. Leasehold improvements are amortized on a straight-line
basis over the shorter of the term of the lease or the estimated useful life of
the improvement.
Computer Software. Certain internal costs incurred in the development of
computer software are capitalized. Capitalization ceases and amortization starts
when the product is available for general release to customers. Costs incurred
to establish technological feasibility of a computer software product are
expensed in the periods in which they are incurred. In addition, computer
software includes amounts purchased for internal use. Computer software costs
are being amortized on a product by product basis, over three to five years.
Annual amortization is the greater of the amount computed using (a) the ratio
that gross revenue for a product bears to the total of current and anticipated
future gross revenue for that product or (b) the straight-line method over the
remaining estimated economic life of the product.
Other Intangibles. Other intangibles include customer lists and consumer panel
database development. Other intangibles are amortized, using principally the
straight-line method, over five to twenty years.
Goodwill. Goodwill represents the excess purchase price over the fair value of
identifiable net assets of businesses acquired and is amortized on a
straight-line basis over five to 40 years. The Company reviews the
recoverability of goodwill based on estimated undiscounted future cash flows
from operating activities compared with the carrying value of goodwill and
recognizes any impairment on the basis of such comparison. The recognition and
measurement of goodwill impairment is assessed at the business unit level.
[F-11]
<PAGE>
Impairment of Long-Lived Assets. Long-lived assets and certain identifiable
intangibles are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. An impairment loss is recognized when the sum of undiscounted
expected future cash flows is less than the carrying amount of such assets. The
measurement for such impairment loss is then based on the fair value of the
asset.
Revenue Recognition. Retail Measurement Service products generally have contract
terms of one to three years. The base contract revenue from the first commitment
period is recognized ratably over the initial contract term. Revenue from
remaining years of multi-year contracts, extensions and renewals are recognized
ratably over their extension periods. After the initial commitment, the contract
generally continues indefinitely, unless canceled by the client with a minimum
of three months' prior written notice.
Revenue for customized research and special modeling and analytical services is
recognized as services are performed.
Consumer Panel products generally have contract terms of one year with revenue
recognized over the term of the contract on a straight-line basis.
International Media Services are generally provided over longer periods with
revenue recognized on a straight-line basis over the contract term. The
contracts are cancelable by the client only with significant penalties.
Foreign Currency Translation. For all operations outside the United States where
the Company has designated the local currency as the functional currency, assets
and liabilities are translated using end-of-period exchange rates; revenue and
expenses are translated using average rates of exchange. For these countries,
currency translation adjustments are accumulated in a separate component of
shareholders' equity, whereas realized transaction gains and losses are
recognized in other income (expense)--net. For operations in countries that are
considered to be highly inflationary, where the U.S. dollar is designated as the
functional currency, monetary assets and liabilities are translated using
end-of-period exchange rates, nonmonetary accounts are translated using
historical exchange rates, and all translation and transaction adjustments are
recognized in other income (expense)--net. Foreign exchange losses charged to
expense amounted to $502, $809 and $1,677 for 1997, 1996, and 1995,
respectively.
The Company has significant operations in non-U.S. countries. Therefore, changes
in the value of foreign currencies affect the Company's financial statements
when translated into U.S. dollars.
Income Taxes. The Company recognizes income taxes during the year in which
transactions enter into the determination of financial statement income, with
deferred taxes being provided for temporary differences between amounts of
assets and liabilities for financial reporting purposes and such amounts as
measured by tax laws.
In accordance with the Tax Sharing Agreement, the Company is liable for Federal,
State and non-U.S. income tax liabilities beginning after the Distribution Date.
In addition, the Company is liable for certain non-U.S. tax liabilities arising
prior to the Distribution. Prior to the Distribution, the Company was included
in the Federal and certain state and non-U.S. income tax returns of D&B.
Stock-Based Compensation. The Company accounts for stock-based compensation as
prescribed by Accounting Principles Board Opinion No. 25. Pro forma net income
and earnings per share amounts, as if the fair value based accounting method in
Statement of Financial Accounting Standards ("SFAS") No. 123 had been applied,
are disclosed in Note 8 to the Consolidated Financial Statements.
Divisional Equity. Divisional equity includes historical investments and
advances from D&B, including net transfers to/from D&B, third party liabilities
paid on behalf of the Company by D&B and amounts due to/from D&B for services
and other charges, as well as current period income/loss, through the
Distribution Date.
Estimates. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses and the disclosure of contingent assets and liabilities. Actual
results could differ from those estimates.
Earnings (Loss) Per Share. In 1997, the Company adopted SFAS No. 128, "Earnings
Per Share," which replaces the calculation of primary and fully diluted earnings
per share with basic and diluted earnings per share. Unlike primary earnings per
share, basic earnings per share excludes any dilutive effects of stock options.
Earnings per share amounts for all periods have been restated to conform with
SFAS No. 128. Earnings per share for periods after October 31, 1996 have been
computed based on the average number of ACNielsen shares outstanding and common
stock equivalents. Earnings per share for periods prior to October 31, 1996 have
been computed using the average number of D&B shares outstanding during the
periods and common stock equivalents, adjusted for the one-for-three
distribution ratio.
[F-12]
<PAGE>
New Accounting Pronouncements. In 1997, the Financial Accounting Standards Board
("FASB") issued SFAS No. 130, "Reporting Comprehensive Income." SFAS No. 130
establishes standards for reporting and display of comprehensive income and its
components in the financial statements. In addition, the FASB issued SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information." SFAS
No. 131 establishes standards for reporting certain information about each
segment of the Company. SFAS No. 130 and SFAS No. 131 are effective for fiscal
years beginning after December 31, 1997. The adoption of SFAS No. 130 and SFAS
No. 131 will not affect the Company's results of operations, cash flows, or
financial position.
Reclassifications. Certain prior-year amounts have been reclassified to conform
with the current-year presentation.
Note 3. Special Charges
In the fourth quarter of 1997, the Company recorded a special charge of $36,000.
The charge consisted of costs to reduce workforce levels, primarily in Japan, as
well as consolidate facilities and rationalize certain product lines in Japan
and other Asia Pacific markets. It also included costs to revalue certain assets
in Europe, Latin America and Asia Pacific. The plans were designed to achieve
long-term productivity improvements, rationalize the Company's product lines and
reduce costs in these regions. The charge included $18,300 to rationalize
certain product lines, including asset revaluations of $7,800, $12,400 to reduce
workforce levels and $5,300 to consolidate real estate and reduce facilities
costs.
The actions will be implemented throughout 1998, and cash payments related to
the charge are expected to be $28,200. The Company expects the full impact of
the actions to be realized starting in 1999, with annual savings at that time of
approximately $12,000.
In the fourth quarter of 1995, the Company recorded a special charge of
$152,170. This charge primarily reflected an impairment loss in connection with
the adoption of the provisions of SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ($74,370), a
provision for postemployment benefits ($14,300) under D&B's severance plan, an
accrual for contractual obligations that have no future economic benefits
($55,800) and other asset revaluations ($7,700). In 1997 and 1996, payments
relating to the accrued contractual obligations totaled $27,682 and $24,974,
respectively. No payments relating to the accrued contractual obligations were
made in 1995.
SFAS No. 121 requires that long-lived assets and certain intangibles be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. In connection with this
review, the Company recorded an impairment loss of $74,370, reflecting the
revaluation of certain fixed assets, administrative and production systems and
other intangibles that will be replaced or will no longer be used by the
Company.
The provision for postemployment benefits of $14,300 represents the cost of
workforce reductions. The accrual for contractual obligations that have no
future economic benefits of $55,800 relates to the acquisition of certain
information and services that are no longer used by the Company, and the other
asset revaluations of $7,700 are necessitated based on an evaluation of the new
business initiatives.
This special charge evolved from D&B's annual budget and strategic planning
process, which included a review of D&B's underlying cost structure, products
and services and assets used in the business. Based upon such analysis,
management having the authority to approve such business decisions committed in
December 1995 to a plan to discontinue certain product lines and dispose of
certain other assets, resulting in the charge. These decisions were not reversed
or modified as a result of D&B's reorganization plan, which was reviewed and,
subject to certain conditions, approved by the Board of Directors of D&B on
January 9, 1996.
Note 4. Sale of Investments
In the fourth quarter of 1997, the Company sold its investments in Manugistics
Group, Inc., a provider of software and services for supply-chain management,
and GeoQuest International Holdings, Inc., a holding company whose principal
business provides information services to the energy industry, resulting in a
total pre-tax gain of $39,039 ($28,200 after-tax), which is included in Other
Income--Net. Combined cash proceeds from the sales totaled $45,899.
Note 5. Acquisitions
In 1997, 1996, and 1995, the Company acquired interests in various companies in
separate transactions that were accounted for as purchases.
The aggregate purchase price of such acquisitions totaled $39,674 in 1997,
including issuance of a $4,000 promissory note payable from 1999 to 2001 and
other contractual obligations of $5,026 payable in 1998 and 1999. In 1997, the
largest acquisition was Entertainment Data, Inc. (EDI), a provider of box office
information for the motion picture industry. The purchase price was $26,912. The
1997 balance sheet reflects a preliminary purchase price allocation for the EDI
net assets that will be finalized in 1998. The Company also acquired or
increased its ownership in businesses in South Africa, Turkey, India, and
Israel. The aggregate purchase price of acquisitions made in 1996 and 1995
totaled $1,907 and $11,466, respectively.
[F-13]
<PAGE>
The results of operations of all purchases are included in the Consolidated
Statements of Operations from dates of acquisition. Had the acquisitions made in
1997, 1996 and 1995 been consummated on January 1 of the year preceding the year
of acquisition, the results of these operations would not have had a significant
impact on the Company's consolidated results of operations for any of the years
presented.
Note 6. Pension and Other Benefit Plans
Defined Benefit Plans
The Company has a defined benefit pension plan covering substantially all
employees in the United States. The benefits to be paid to employees under this
plan are based on notional account balances which are increased annually by
pay-related and interest credits. Pension costs are determined actuarially and
funded to the extent allowable under the Internal Revenue Code (IRC).
Supplemental plans in the United States are maintained to provide retirement
benefits to eligible employees in excess of levels allowed by the IRC.
The Company's subsidiaries outside the United States provide retirement benefits
for employees consistent with local practices, primarily using defined benefit
or termination indemnity plans.
At the Distribution Date, the Company assumed responsibility for pension
benefits for active employees of the Company and established separate retirement
plans for its employees; the responsibility for all others, principally
retirees, remained with D&B. An allocation of assets and liabilities for such
active employee benefits has been included in the consolidated financial
statements.
Prior to the Distribution Date, the Company's United States employees
participated in D&B's defined benefit pension plan covering substantially all
employees in the United States. The benefits to be paid to employees under the
plan were based on years of credited service and average final compensation.
The Company accounted for the plan as a multi-employer plan. Accordingly, the
Company has recorded pension costs as allocated by D&B totaling $1,301 for the
ten months ended October 31, 1996, and $882 for the year 1995.
The components of net United States pension income for the periods subsequent to
the Distribution Date and net non-United States pension costs for the years
ending 1997, 1996 and 1995 are as follows:
Two Months
Year Ended Ended
December 31, December 31,
--------------------------
United States Plans 1997 1996
====================================================================
Service cost on benefits earned
during the year $ 2,020 $ 314
Interest cost on projected
benefit obligation 2,920 513
Actual return on plan assets (10,489) (726)
Net amortization and deferral 5,385 (141)
- - --------------------------------------------------------------------
Net periodic pension (income) $ (164) $ (40)
====================================================================
Year Ended December 31,
---------------------------------
Non-United States Plans 1997 1996 1995
================================================================================
Service cost on benefits earned
during the year $ 6,746 $ 6,904 $ 6,917
Interest cost on projected
benefit obligation 13,676 13,929 13,465
Actual return on plan assets (17,686) (17,860) (15,692)
Net amortization and deferral (488) (354) (398)
- - --------------------------------------------------------------------------------
Net periodic pension costs $ 2,248 $ 2,619 $ 4,292
================================================================================
[F-14]
<PAGE>
The following table sets forth the funded status and amounts recognized in the
Company's Consolidated Balance Sheets at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
---------------------------------------------------------------
1997 1996
---------------------------------------------------------------
Assets Exceed Accumulated Assets Exceed Accumulated
Accumulated Benefits Exceed Accumulated Benefits Exceed
Benefits Assets Benefits Assets
====================================================================================================================================
<S> <C> <C> <C> <C>
UNITED STATES PLANS
Fair Value of Plan Assets $ 60,115 $ 50,266
- - ------------------------------------------------------------------------------------------------------------------------------------
Actuarial Present Value of Benefit Obligations
Vested Benefits 32,325 $ 1,784 24,854
Non-Vested Benefits 4,997 1,104 5,359 $ 1,255
- - ------------------------------------------------------------------------------------------------------------------------------------
Accumulated Benefit Obligations 37,322 2,888 30,213 1,255
Effect of Projected Salary Increases 2,022 2,994 2,932 2,623
- - ------------------------------------------------------------------------------------------------------------------------------------
Projected Benefit Obligations 39,344 5,882 33,145 3,878
- - ------------------------------------------------------------------------------------------------------------------------------------
Plan Assets in Excess of (Less than) Projected Benefit Obligations 20,771 (5,882) 17,121 (3,878)
Unrecognized Net (Gain) Loss (4,333) 1,432 (2,619) 24
Unrecognized Prior Service (Credit) Cost (402) 18 (436) (64)
Unrecognized Net Transition (Asset) Obligation (1,965) 18 (1,706) 1,051
- - ------------------------------------------------------------------------------------------------------------------------------------
Prepaid pension cost (pension liability) recognized in the
balance sheet $ 14,071 $ (4,414) $ 12,360 $ (2,867)
- - ------------------------------------------------------------------------------------------------------------------------------------
NON-UNITED STATES PLANS
====================================================================================================================================
Fair Value of Plan Assets $ 240,923 $ 228,930
- - ------------------------------------------------------------------------------------------------------------------------------------
Actuarial Present Value of Benefit Obligations
Vested Benefits 169,572 $ 21,075 165,402 $ 19,601
Non-Vested Benefits 1,966 2,484 2,059 2,168
- - ------------------------------------------------------------------------------------------------------------------------------------
Accumulated Benefit Obligations 171,538 23,559 167,461 21,769
Effect of Projected Salary Increases 24,875 5,219 29,459 5,612
- - ------------------------------------------------------------------------------------------------------------------------------------
Projected Benefit Obligations 196,413 28,778 196,920 27,381
- - ------------------------------------------------------------------------------------------------------------------------------------
Plan Assets in Excess of (Less than) Projected Benefit Obligations 44,510 (28,778) 32,010 (27,381)
Unrecognized Net (Gain) Loss (9,123) 290 (2,985) 0
Unrecognized Prior Service Cost 7,583 186 8,159 190
Unrecognized Net Transition (Asset) Obligation (10,890) 720 (13,557) 761
- - ------------------------------------------------------------------------------------------------------------------------------------
Prepaid pension cost (pension liability) recognized in the
balance sheet $ 32,080 $ (27,582) $ 23,627 $ (26,430)
====================================================================================================================================
</TABLE>
Plan assets are invested in diversified portfolios that consist primarily of
equity and debt securities.
The significant actuarial assumptions at December 31, 1997, 1996 and 1995 were
as follows:
-------------------------------------
1997 1996 1995
===============================================================================
United States Plans:
Discount rate 7.0% 7.5% 7.0%
Expected long-term rate of return
on plan assets 9.0% 9.0% 9.75%
Average rate of increase in future
compensation levels 4.16% 4.16% 4.16%
Non-United States Plans:
Weighted average discount rate 6.72% 7.92% 8.15%
Weighted average expected long-term
rate of return on plan assets 8.40% 9.32% 9.85%
Weighted average rate of increase in
future compensation levels 3.91% 4.58% 4.94%
================================================================================
Defined Contribution Plans
Effective upon the Distribution, the Company established an Employee Stock
Ownership Plan (ESOP) for the benefit of its United States employees. The
Company may contribute cash or Company common stock to each employee's account
in an amount currently equal to 3.5% of compensation (subject to IRS
limitations). In connection with the ESOP, the Company issued 221,466 and 18,775
shares, and recognized compensation expense of $4,005 and $639 for the year 1997
and the two months ended December 31, 1996, respectively.
Prior to the Distribution Date, certain United States employees were eligible to
participate in a D&B sponsored defined contribution plan. The Company made a
matching contribution of 50% of the employee's contribution up to 6% of pay and
an additional match depending on its earnings per share, all subject to
specified limits.
[F-15]
<PAGE>
The Company's expense related to this plan was $3,523 for the ten months ended
October 31, 1996, and $4,695 for the year 1995. Effective with the Distribution,
the Company established a new savings plan which does not provide for a matching
contribution.
Note 7. Postretirement and Postemployment Benefits
The Company provides various health-care and life-insurance benefits for retired
employees who become eligible for these benefits if they terminate employment
after completing at least ten years of service with the Company after age 45.
The postretirement medical benefit is contributory. Certain of the Company's
subsidiaries outside the United States have postretirement benefit plans,
although most participants are covered by government-sponsored or administered
plans. The cost of Company-sponsored postretirement benefit plans outside the
United States is not significant. In certain instances, the Company provides
postemployment benefits to former or inactive employees following employment but
before retirement, principally severance.
Prior to the Distribution Date, the Company accounted for the postretirement
benefit plan as a multi-employer plan. Accordingly, the Company has recorded
postretirement benefit costs as allocated by D&B totaling $1,432 for the ten
months ended October 31, 1996, and $1,356 for 1995.
At the Distribution, the Company assumed responsibility for postretirement
benefits for active employees of the Company; the responsibility for all others,
principally retirees, remained with D&B. The components of net periodic
postretirement benefit cost other than pensions for the periods subsequent to
the Distribution Date are summarized as follows:
Two Months
Year Ended Ended
December 31, December 31,
------------ ------------
1997 1996
================================================================================
Service Cost $404 $ 80
Interest Cost on Accumulated Benefit Obligation 469 60
Net Amortization and Deferral (43) (20)
- - --------------------------------------------------------------------------------
Net Postretirement Benefit Cost $830 $120
================================================================================
The status of postretirement benefit plans other than pensions at December
1997 and 1996, is as follows:
December 31,
--------------------------------
1997 1996
================================================================================
Active Employees--Eligible $(1,910) $(1,720)
Active Employees--Not-Yet Eligible (3,183) (2,790)
Retirees (2,136) --
- - --------------------------------------------------------------------------------
Accumulated Postretirement Benefit Obligations (7,229) (4,510)
Unrecognized Net Loss 1,871 100
Unrecognized Prior Service (Credit) (140) (260)
- - --------------------------------------------------------------------------------
Accrued Postretirement Benefit Obligations $(5,498) $(4,670)
================================================================================
Obligations are unfunded, and the actuarial present values of accumulated
plan benefit obligations are recognized in the consolidated balance sheets.
The following actuarial assumptions were used to determine the accumulated
postretirement benefit obligation:
December 31,
----------------------
1997 1996
================================================================================
Discount rate 7.0% 7.5%
Assumed rate of increase in compensation 4.16% 4.16%
Projected health care cost trend rate 8.0% 8.0%
================================================================================
The cost of covered health-care benefits is assumed to decrease to 5.0% by the
year 2004 and remain constant thereafter. Increasing the assumed health-care
cost trend rate by one percentage point in each year would increase the
accumulated postretirement benefit obligation at December 31, 1997, by $715 and
would increase the 1997 aggregate service interest cost by $99.
Note 8. Employee Stock and Related Plans
In October 1996, the Company adopted three stock incentive plans which reserve
shares of common stock for issuance to key employees and non-employee directors.
Pursuant to one such plan, immediately following the Distribution, outstanding
awards under the D&B stock option plans held by Company employees were replaced
by Company stock options. The replacement awards have the same ratio of the
exercise price per option to the market value per share, the same aggregate
difference between market value and exercise price and substantially the same
other terms and conditions as the options they replaced. A total of 18,300,000
shares have been reserved for issuance under these plans.
Under the stock incentive plans adopted in 1996, 6,483,607 shares of common
stock were available for future grants as of December 31, 1997. These plans
provide that shares granted come from the Company's authorized but unissued
common stock or treasury stock. The price of options granted pursuant to these
plans will not be less than the fair market value of the shares on the date of
grant, with the exception of the replacement options, the price of which was
determined as described above. Stock options granted during 1996 and 242,000
options granted in 1997 ("effective date options") have a term of ten years and
vest over four or six years. In addition, effective date options may vest
earlier if the Company's stock price reaches certain targets. One-half of the
effective date options (2,393,527 shares) vested on September, 11, 1997, when
the Company's stock price reached 150% of those options' exercise price for five
consecutive trading days. The remaining unvested effective date options would
vest on an accelerated basis if the stock price reaches 200% of the exercise
price for five consecutive trading days.
[F-16]
<PAGE>
The plans also provide for the granting of limited stock appreciation rights
(LSARs) in tandem with stock options to certain key employees. At December
31, 1997, 2,613,641 LSARs were outstanding, which are exercisable upon the
occurrence of a specified event.
The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock Based Compensation." Accordingly, no compensation
expense has been recognized for the Company's three stock incentive plans.
Had compensation expense for the Company's plans been determined based on
the fair value at the grant date for option grants after January 1, 1995,
including the conversion of D&B stock options granted prior to 1995,
consistent with the provisions of SFAS No. 123, the Company's net income and
net earnings per share would have been reduced to the pro-forma amounts
indicated below. The effect on 1995 is not material.
--------------------------------
1997 1996
================================================================================
Net income--as reported $35,897 $15,844
Net income--pro forma $23,889 $13,200
Basic earnings per share--as reported $ .63 $ .28
Basic earnings per share--pro forma $ .42 $ .23
Diluted earnings per share--as reported $ .62 $ .28
Diluted earnings per share--pro forma $ .41 $ .23
================================================================================
Note:
The 1997 pro-forma amounts include a pre-tax charge of $11,590 as a result
of one-half of the effective date options vesting when the Company's stock
price reached 150% of those options' exercise price. The 1996 pro-forma
amounts include an incremental pre-tax charge of $3,048, as a result of the
replacement stock option plan being a modification of the D&B stock option
plan in accordance with SFAS No. 123.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted average
assumptions (including assumptions related to D&B options to determine
compensation expense for the period prior to the Distribution):
1996
------------------------------
Old ACNielsen &
----------- D&B Replacement
1997 Options Options
================================================================================
Expected dividend yield 0% 4.7% 0%
Expected stock price volatility 30% 15% 30%
Risk-free interest rate 5.90% 6.15% 6.11%
Expected holding period of options 4.1 years 5.0 years 5.0 years
================================================================================
The weighted average fair value of options granted during 1997 and 1996 was
$6.22 and $6.16 per share, respectively.
The following is a summary of stock option activity and number of shares
reserved for outstanding options:
------------------------------
Average option
Shares price per share
================================================================================
Conversion of D&B options at
November 1, 1996 4,054,731 $15.66
Granted--Effective date options 4,706,055 15.75
Exercised (69,190) 14.53
Canceled or Expired (148,336) 16.15
- - --------------------------------------------------------------------------------
Options outstanding at
December 31, 1996 8,543,260 $15.71
Granted 1,261,500 21.01
Exercised (373,636) 15.37
Canceled or Expired (686,434) 16.00
- - --------------------------------------------------------------------------------
Options outstanding at
December 31, 1997 8,744,690 $16.46
================================================================================
The following is a summary of shares exercisable, average remaining life and
average option price per share of options outstanding at December 31, 1997:
-----------------------------------------------------
Average Average
Shares Shares option price remaining
Outstanding Exercisable per share life
================================================================================
Converted D&B options 2,998,823 2,197,852 $15.62 6.6 years
Effective date options 4,726,367 2,787,646 15.72 8.9 years
Options granted subsequent
to July, 1997 1,019,500 -- 22.38 9.9 years
- - --------------------------------------------------------------------------------
Options outstanding at
December 31, 1997 8,744,690 4,985,498 $16.46 8.2 years
================================================================================
Success Share Program. On December 9, 1996, the Company granted, to each of its
full-time and regular employees, stock appreciation rights at a strike price of
$15.75, entitling the employee to the appreciation on the equivalent of 25
shares of the Company's common stock, subject to certain terms, conditions and
limitations. The rights vested on December 9, 1997 and expire on December 9,
1999. Charges to income in 1997 with respect to this program totaled $3,212.
There were no charges to income in 1996 with respect to this program.
[F-17]
<PAGE>
Note 9. Income Taxes
Income (loss) before provision for income taxes consisted of:
------------------------------------------
1997 1996 1995
================================================================================
U.S. $56,221 $(35,714) $(244,236)
Non-U.S. 12,323 66,208 53,188
- - --------------------------------------------------------------------------------
$68,544 $ 30,494 $(191,048)
================================================================================
In 1995, the Company had not recognized benefits on the U.S. losses reflected
above since the Company did not believe it was more likely than not that such
benefits could be recognized on a separate-company basis. In 1996, U.S. losses
through the Distribution Date were realized by D&B and, accordingly, the related
tax benefit was reflected by the Company through divisional equity.
The provision (benefit) for income taxes consisted of:
--------------------------------------------
1997 1996 1995
================================================================================
U.S. Federal and State:
Current $ 6,790 $ (9,776) $ 32,237
Deferred 10,286 (996) (30,237)
- - --------------------------------------------------------------------------------
Total 17,076 (10,772) 2,000
- - --------------------------------------------------------------------------------
Non-U.S.:
Current 25,781 10,631 22,846
Deferred (10,210) 14,791 14,990
- - --------------------------------------------------------------------------------
Total 15,571 25,422 37,836
- - --------------------------------------------------------------------------------
Total $ 32,647 $14,650 $ 39,836
================================================================================
The following table summarizes the significant differences between the U.S.
Federal statutory taxes and the Company's provision for income taxes for
consolidated financial statement purposes:
-----------------------------------------
1997 1996 1995
================================================================================
Tax expense (benefit) at the U.S.
statutory rate $23,990 $10,673 $(66,867)
State and local income taxes, net of
Federal effect 1,827 (1,161) (8,962)
U.S. losses for which no tax benefits
were provided -- -- 94,445
Reduction in the valuation allowance (6,313) (656) --
Non-U.S. taxes 8,063 2,249 19,220
Other 5,080 3,545 2,000
- - --------------------------------------------------------------------------------
Provision for Income Taxes $32,647 $14,650 $ 39,836
================================================================================
The Company's deferred tax assets (liabilities) are comprised of the following
at December 31:
--------------------------------
1997 1996
================================================================================
Deferred Tax Assets:
Operating Losses $ 56,093 $ 52,784
Special Charges 12,580 13,398
Employee Benefits 15,423 19,370
Bad Debts 951 892
- - --------------------------------------------------------------------------------
85,047 86,444
- - --------------------------------------------------------------------------------
Valuation Allowance (73,553) (79,866)
- - --------------------------------------------------------------------------------
11,494 6,578
- - --------------------------------------------------------------------------------
Deferred Tax Liabilities:
Postretirement Benefits (5,628) (4,944)
Intangibles (10,820) (7,560)
Deferred Revenue (6,137) (6,375)
Fixed Assets (5,175) (4,048)
Investments -- (4,056)
Other Accruals (4,714) (1,911)
Other Assets (5,986) (2,530)
- - --------------------------------------------------------------------------------
(38,460) (31,424)
- - --------------------------------------------------------------------------------
Net Deferred Tax Liability $(26,966) $(24,846)
================================================================================
During the year ended December 31, 1997, the valuation allowance decreased
by $6,313, primarily as a result of the utilization of U.S. net operating
loss carryforwards.
U.S. operating loss carryforwards of approximately $8,700 will expire in 2011.
Non-U.S. loss carryforwards of $75,327 will expire at various times through
2002. Non-U.S. loss carryforwards of $73,919 have an indefinite life. An income
tax benefit of $602 related to employee stock options was credited to
shareholders' equity in 1997. No provision was made for U.S. taxes payable on
undistributed earnings amounting to approximately $167,400 and $167,000 in 1997
and 1996, respectively, as such amounts are permanently reinvested.
[F-18]
<PAGE>
Note 10. Bank Credit Line
In December 1996, the Company entered into a credit agreement with a global bank
syndicate comprising twelve banks. This $125,000 credit facility is unsecured
and has a three-year term. The facility provides for multicurrency and bridge
loans. The base interest rates can be fixed or various floating rates, depending
on the type of loan undertaken and currencies involved. Interest spreads and
fees vary based on the Company's fixed charge coverage ratio for the preceding
four quarters. The terms of the credit agreement contain, among other
provisions, limitations on total debt/leverage levels, minimum earnings before
interest, taxes, depreciation and amortization and minimum fixed charge
coverages. The agreement also prohibits the Company from paying cash dividends
and permits share repurchases only in connection with employee benefit programs.
At December 31, 1997 and 1996, approximately $23,001 and $22,700, respectively,
were drawn against this facility. The nominal value of the borrowings
approximates fair value. There are no compensating balance requirements or
material commitment fees associated with the credit line.
The weighted average interest rates on short-term debt at December 31, 1997 and
1996, respectively, were 0.63% and 7.65%. The Company's short-term borrowings at
December 31, 1997, were in Japan.
Note 11. Financial Instruments with Off-Balance-Sheet Risk
The Company uses foreign exchange forward contracts to hedge significant known
transactional exposures. At December 31, 1997, the Company had $5,093 of foreign
exchange forward contracts outstanding, which mature on various dates over the
next four months. In early 1998, the Company entered into additional foreign
exchange forward contracts totaling $36,871 to hedge other known transactional
exposures. These forward contracts mature in monthly installments through
December 1998. Any gain or loss on the forward contracts is deferred and
included in the measurement of the related foreign currency transaction.
The Company does not utilize derivative financial instruments for trading or
other speculative purposes.
Note 12. Capital Stock
The Company has authority to issue 160,000,000 shares of which 150,000,000
represent shares of ACNielsen Common Stock, 5,000,000 represent shares of
Preferred Stock and 5,000,000 represent shares of Series Common Stock. The Board
of Directors is authorized to issue one or more series of Preferred Stock and
Common Stock, and to establish the number of shares in that series, voting
rights (if any), consideration for such shares, and other rights or restrictions
of the shares in that series. At December 31, 1997, no Preferred Stock or Series
Common Stock had been issued.
In October 1996, the Company adopted a Shareholders' Rights Plan. Under the
plan, each share of the Company's Common Stock has a right which trades with the
stock until the right becomes exercisable. Each right entitles the shareholders
to buy 1/1,000 of a share of Series A Junior Participating Preferred Stock of
the Company at a purchase price of $108 per 1/1,000 of a share, subject to
adjustment. The rights will not be exercisable until a person or group
(Acquiring Person) acquires beneficial ownership of, or commences a tender offer
for, 15% or more of the Company's outstanding Common Stock.
In the event of such a 15% acquisition or if subsequently the Company is
acquired in a merger or other business combination, as described in the
Shareholders' Rights Plan, each right will entitle its holder (other than the
Acquiring Person) to receive upon exercise, stock with a value of two times the
exercise price in the form of the Company's Common Stock or, where appropriate,
the Acquiring Person's common stock. The Company may redeem the rights, which
expire in October 2006, for $.01 per right, under certain circumstances.
In December 1997, the Board of Directors authorized the Company to repurchase up
to one million shares of ACNielsen common stock from time to time on the open
market.
Note 13. Other Transactions with Affiliates
Prior to the Distribution Date, the Company participated in D&B's centralized
cash management system to finance its operations. Cash deposits from most of the
Company's businesses were transferred to D&B on a daily basis, and D&B funded
the Company's disbursement bank accounts as required. No interest was charged on
these transactions.
D&B historically provided certain centralized services to the Company. Prior to
the Distribution Date, expenses related to these services were allocated to the
Company based on utilization of specific services or, where not estimable, based
on assets employed by the Company in proportion to D&B's total assets.
Management believes these allocation methods were reasonable. These allocations
were $82,600 in the ten months ended October 31, 1996, and $85,700 in 1995 and
are included in operating costs and selling and administrative expenses in the
Consolidated Statements of Operations. Amounts due to D&B for these expenses
were included in Divisional Equity.
The Company provided certain services to D&B and affiliates at negotiated
prices. Operating revenue from such services totaled $895 in the ten months
ended October 31, 1996 and $1,531 in 1995.
[F-19]
<PAGE>
Net transfers to/from D&B, included in Divisional Equity, included advances and
loans from affiliates, net cash transfers to/from D&B, third-party liabilities
paid on behalf of the Company by D&B, amounts due to/from D&B for services and
other charges, and income taxes paid on behalf of the Company by D&B. No
interest has been charged on these transactions. The weighted average balance
due to D&B was $324,578 for the ten months ended October 31, 1996 and $713,099
for 1995.
The activity in the net transfers (to) from D&B account, included in Divisional
Equity, is summarized as follows:
-----------------------------------------
Ten Months Ended Year Ended
October 31, 1996 December 31, 1995
================================================================================
D&B services and other charges $ 88,059 $ 88,505
Loans and advances--net (379,189) 132,734
U.S. income taxes (12,507) 32,237
Cash transfers--net 349,847 (152,336)
- - --------------------------------------------------------------------------------
Net transfers from D&B $ 46,210 $ 101,140
================================================================================
Note 14. Leases and Other Commitments
Certain of the Company's operations are conducted from leased facilities, which
are under operating leases. Rental expense under real estate operating leases,
net of sublease rentals, for the years 1997, 1996 and 1995 was $37,021, $38,427
and $40,109, respectively. The totals include $98 for the ten months ended
October 31, 1996 and $115 in 1995 for facilities usage charged by D&B or an
affiliate.
The Company also leases or participates with D&B in leases of certain computer
and other equipment under operating leases. These leases are frequently
renegotiated or otherwise changed as advancements in computer technology produce
opportunities to lower costs and improve performance. Rental expense under
computer and other equipment leases was $23,141, $26,570 and $25,076 for 1997,
1996 and 1995, respectively.
At December 31, 1997, the approximate minimum annual rental expense for real
estate and computer and other equipment under operating leases that have
remaining noncancelable lease terms in excess of one year, net of sublease
rentals, are as follows:
---------------------------------
Computer &
Other
Years Ended Real Estate Equipment
================================================================================
1998 $ 30,616 $15,930
1999 26,672 10,214
2000 22,353 5,845
2001 21,436 2,253
2002 14,847 1,370
Thereafter 20,014 4,707
- - --------------------------------------------------------------------------------
$135,938 $40,319
================================================================================
The Company has agreements with a third party for certain data-processing
services, extending beyond one year. At December 31, 1997, the minimum annual
services covered by these agreements are approximately as follows:
Years Ended
================================================================================
1998 $ 6,500
1999 3,678
2000 878
2001 878
2002 878
Thereafter 659
- - --------------------------------------------------------------------------------
$13,471
================================================================================
Prior to the Distribution, the Company entered into certain lease or sublease
agreements with D&B, Cognizant, affiliates or third parties for certain leased
facilities, computer and other equipment, which principally are a continuation
of existing lease commitments at market rates. The commitments are included in
the amounts disclosed above.
Note 15. 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
"ACNielsenCo") 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
latter 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. On
June 3, 1997, defendants filed an answer and counterclaims. Defendants denied
[F-20]
<PAGE>
all material allegations of the complaint. In addition, ACNielsenCo asserted
counterclaims against IRI alleging that IRI has made false and misleading
statements about ACNielsenCo's services and commercial activities and that such
conduct constitutes a violation of Section 43(a) of the Lanham Act and unfair
competition. ACNielsenCo 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. On December 1, 1997,
the Court denied defendants' motion.
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.
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.
Note 16. Supplemental Financial Data
Accounts Receivable--Net:
----------------------------------
1997 1996
================================================================================
Trade $224,038 $227,171
Less: allowance for doubtful accounts (12,114) (10,847)
Unbilled receivables 21,089 25,651
Other 27,808 28,628
- - --------------------------------------------------------------------------------
$260,821 $270,603
================================================================================
Other Current Assets:
----------------------------------
1997 1996
================================================================================
Deferred taxes $11,129 $ 6,402
Prepaid expenses 27,294 24,420
- - --------------------------------------------------------------------------------
$38,423 $30,822
================================================================================
Property, Plant and Equipment--Net:
----------------------------------
1997 1996
================================================================================
Land $ 4,545 $ 4,593
Buildings 50,216 50,073
Computer hardware and other equipment 363,536 374,523
Leasehold improvements 30,356 35,321
Less: accumulated depreciation and amortization (282,993) (278,457)
- - --------------------------------------------------------------------------------
$ 165,660 $ 186,053
================================================================================
[F-21]
<PAGE>
Intangibles and Other Assets, Computer Software and Goodwill:
-----------------------------------------------------
Intangibles and Computer
Other Assets Software Goodwill
================================================================================
January 1, 1996 $ 62,196 $ 27,427 $208,454
Additions at cost 2,495 24,450 1,907
Amortization (10,996) (14,666) (9,999)
Foreign translation, asset
write-offs and other (5,085) 647 3,660
- - --------------------------------------------------------------------------------
December 31, 1996 48,610 37,858 204,022
Additions at cost 11,182 14,774 34,885
Amortization (9,883) (19,037) (10,114)
Foreign translation, asset
write-offs and other 5,092 (8,307) (8,310)
- - --------------------------------------------------------------------------------
December 31, 1997 $ 55,001 $ 25,288 $220,483
================================================================================
Accumulated amortization of intangibles and other assets, computer software
and goodwill was $164,285 and $140,542 at December 31, 1997 and 1996,
respectively.
Accounts Payable:
----------------------------------
1997 1996
================================================================================
Trade $47,303 $47,242
Customer advances 4,344 1,805
Taxes other than income taxes 27,727 34,149
Other 7,534 1,484
- - --------------------------------------------------------------------------------
$86,908 $84,680
================================================================================
Accrued and Other Current Liabilities:
----------------------------------
1997 1996
================================================================================
Salaries, wages, bonuses and other compensation $ 66,093 $ 47,183
Postemployment benefits 41,590 26,346
Other 206,181 187,077
- - --------------------------------------------------------------------------------
$313,864 $260,606
================================================================================
Note 17. Operations by Geographic Area
The Company, operating globally, delivers market research, information and
analysis to the consumer products and service industries.
Financial information by geographic area is summarized as follows. Inter-area
sales were not significant.
---------------------------------------------
Operating
Income (Loss)
Excluding
Operating Special Identifiable
Revenue Charges(1)(2) Assets
================================================================================
1997
United States $ 310,037 $ 19,510 $ 278,865
Canada/Latin America 203,978 23,723 144,320
- - --------------------------------------------------------------------------------
Total Americas 514,015 43,233 423,185
- - --------------------------------------------------------------------------------
Europe, Middle East & Africa 579,050 21,192 396,087
Asia Pacific 264,652 6,929 209,446
ACNielsen Japan 33,870 (10,598) 10,390
- - --------------------------------------------------------------------------------
Total $1,391,587 $ 60,756 $ 1,039,108
================================================================================
1996
United States $ 286,522 $ (4,912) $ 269,397
Canada/Latin America 185,516 22,210 136,656
- - --------------------------------------------------------------------------------
Total Americas 472,038 17,298 406,053
- - --------------------------------------------------------------------------------
Europe, Middle East & Africa 597,669 21,828 399,890
Asia Pacific 254,082 4,762 221,581
ACNielsen Japan 34,855 (15,733) 8,544
- - --------------------------------------------------------------------------------
Total $ 1,358,644 $ 28,155 $ 1,036,068
================================================================================
1995
United States $ 274,552 $ (65,971) $ 192,429
Canada/Latin America 169,009 20,837 112,373
- - --------------------------------------------------------------------------------
Total Americas 443,561 (45,134) 304,802
- - --------------------------------------------------------------------------------
Europe, Middle East & Africa 583,269 22,801 430,586
Asia Pacific 216,875 12,595 198,310
ACNielsen Japan 37,640 (22,100) 9,089
- - --------------------------------------------------------------------------------
Total $ 1,281,345 $ (31,838) $ 942,787
================================================================================
(1) 1997 Operating Income excludes a special charge of $36,000 ($2,200 in
Canada/Latin America, $4,000 in Europe, Middle East & Africa (EMEA),
$7,500 in Asia Pacific and $22,300 in ACNielsen Japan) in the fourth
quarter. (See Note 3 to the Consolidated Financial Statements.)
(2) 1995 Operating Loss excludes a special charge of $152,170 ($107,000 in the
U.S., $1,870 in Canada/Latin America, $28,400 in EMEA, $900 in Asia
Pacific and $14,000 in ACNielsen Japan) in the fourth quarter and includes
a 1995 third quarter incremental provision for postemployment benefits of
$31,900 ($16,500 in the U.S., $2,000 in Canada/Latin America, and $13,400
in EMEA). (See Note 3 to the Consolidated Financial Statements.)
[F-22]
<PAGE>
Note 18. Earnings Per Share
The following table sets forth the computation of basic and diluted earnings
(loss) per share:
<TABLE>
<CAPTION>
--------------------------------
Amounts in thousands, except per share data 1997 1996 1995
===========================================================================================
<S> <C> <C> <C>
Weighted-average number of Shares Outstanding Basic EPS 57,139 56,712 56,507
Dilutive Effect Of:
Stock Options 1,230 270
- - -------------------------------------------------------------------------------------------
Weighted-average number of Shares Outstanding and
Common Stock Equivalents Diluted EPS 58,369 56,982 56,507
===========================================================================================
Net Income (loss) $ 35,897 $ 15,844 $(230,884)
===========================================================================================
Basic Earnings (loss) per share $ .63 $ .28 $ (4.09)
===========================================================================================
Diluted Earnings (loss) per share $ .62 $ .28 $ (4.09)
===========================================================================================
</TABLE>
All periods prior to November 1, 1996, reflect the adjusted share and option
activity of The Dun & Bradstreet Corporation. Options to purchase 1,864,788
shares of common stock at share prices ranging from $16.08 to $17.05 per share
were outstanding at the end of the year 1996 but were not included in the
computation of diluted EPS because the options' exercise price was greater than
the average market price of the common shares. No adjustments were made to 1995
basic EPS to compute diluted EPS as it would result in anti-dilution. As such,
no adjustment was made for options to purchase 5,035,589 shares of common stock
at share prices ranging from $11.10 to $17.05 which were outstanding at the end
of the year 1995.
Note 19. Quarterly Financial Data (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------------------------------
Amounts in thousands, except per share data March 31 June 30 September 30 December 31 Year
===========================================================================================================================
<S> <C> <C> <C> <C> <C>
1997
Operating Revenue $ 324,774 $ 356,325 $ 346,864 $ 363,624 $1,391,587
Operating (Loss) Income(1) $ (9,178) $ 18,657 $ 23,143 $ (7,866) $ 24,756
Net (Loss) Income $ (4,116) $ 10,249 $ 13,731 $ 16,033 $ 35,897
(Loss) Earnings Per Share(2):
Basic $ (.07) $ .18 $ .24 $ .28 $ .63
Diluted $ (.07) $ .18 $ .23 $ .27 $ .62
Weighted-Average Number of Shares Outstanding(2):
Basic 56,919 57,035 57,209 57,388 57,139
Diluted 56,919 57,536 59,540 59,259 58,369
===========================================================================================================================
1996
Operating Revenue $ 307,292 $ 336,948 $ 346,743 $ 367,661 $1,358,644
Operating (Loss) Income $ (18,750) $ 11,029 $ 15,196 $ 20,680 $ 28,155
Net (Loss) Income $ (19,190) $ 1,706 $ 21,882(3) $ 11,446 $ 15,844
Actual and Pro Forma (Loss) Earnings Per Share(2):
Basic $ (.34) $ .03 $ .39(3) $ .20 $ .28
Diluted $ (.34) $ .03 $ .38 $ .20 $ .28
Actual and Pro Forma Weighted-Average Number of
Shares Outstanding(2):
Basic 56,556 56,686 56,713 56,766 56,712
Diluted 56,556 56,963 56,937 57,040 56,982
===========================================================================================================================
</TABLE>
(1) Includes a special charge of $36,000 pre-tax ($28,200 after-tax) or $.49
per basic share, $.48 per diluted share in the fourth quarter.
(2) The 1996 and first three quarters of 1997 earnings per share amounts have
been restated, to comply with SFAS No. 128, "Earnings Per Share."
(3) Includes an adjustment to reduce the Company's effective tax rate to 48%
on a year-to-date basis. Utilizing a 48% effective rate in the quarter
would have resulted in net income of $8,316 or $.15 per share (basic).
[F-23]
<PAGE>
ACNIELSEN CORPORATION
Summary Financial Data
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------------------------------
(Dollar amounts in millions, except per share data) 1997 1996 1995 (1) 1994 (2) 1993(2)
====================================================================================================================
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Operating Revenue $ 1,392 $ 1,359 $ 1,281 $ 1,092 $ 1,045
Income (Loss) before cumulative effect
of changes in accounting principles $ 36 $ 16 $ (231) $ (65) $ (55)
Actual and Pro Forma Earnings (Loss)
Per Share of Common Stock:
Basic(3) $ .63 $ .28 $ (4.09) $ (1.15) $ (.94)
Diluted(3) $ .62 $ .28 $ (4.09) $ (1.15) $ (.94)
Balance Sheet Data:
Total Assets $ 1,039 $ 1,036 $ 943 $ 958 $ 828
Long-term Debt $ 8 $ 3 $ 6 $ 9 $ 4
====================================================================================================================
</TABLE>
(1) Income (Loss) before cumulative effect of changes in accounting principles
in 1995 includes a special charge in the fourth quarter of $152 million
pre-tax ($141 million after-tax or $2.50 per basic and diluted share) for
costs principally associated with asset impairments, software write-offs
and contractual obligations that have no future economic benefit, and an
incremental postemployment benefit expense of $32 million pre-tax ($24
million after-tax or $.43 per basic and diluted share).
(2) Income (Loss) before cumulative effect of changes in accounting principles
includes restructuring expense of $9 million and $60 million pre-tax, in
1994 and 1993, respectively.
(3) The computation of pro forma Earnings (Loss) per share for the periods
prior to November 1, 1996 (the Distribution), is based on the average
number of shares of D&B Common Stock and Common Stock Equivalents
outstanding during the respective periods, adjusted for the one-for-three
distribution ratio.
[F-24]
<TABLE>
EXHIBIT 21
ACNIELSEN CORPORATION
LIST OF ACTIVE SUBSIDIARIES - 1/31/98
- - ---------------------------------------------------------------------------------------------------------------------------
State or other % Ownership
Name Jurisdiction of 100% Except
Incorporation as Noted
- - ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C>
A. C. NIELSEN COMPANY Delaware
A. C. Nielsen (Argentina) S.A. Delaware
Control Publicitario S.A. Argentina
IPSA S.A. Argentina
A.C. Nielsen Argentina S.A. Argentina
A. C. Nielsen Ges.mbH Austria
ANR Piackutato Kft. Hungary
A. C. Nielsen Company (Belgium) S.A. Belgium
A. C. Nielsen Company & Co. SNC Belgium
A. C. Nielsen do Brasil Ltda. Brazil
Companhia Brasileira de Pesquisa e Analise Brazil
ACNielsen Canada Holding Ltd. Canada
ACNielsen Company of Canada Limited Canada
Nielsen Korea Limited Korea
A. C. Nielsen Chile Limitada Chile
A. C. Nielsen Chile S.A. Chile 51.0
A. C. Nielsen de Colombia S.A. Colombia
Nielsen del Ecuador S.A. Ecuador
ACNielsen AIM A/S Denmark
AIM Farmstat ApS Denmark 66.67
A. C. Nielsen S.A. France
ERIM S.A. France
Panel de Gestion S.A.R.L. France
A. C. Nielsen (Dublin) Limited Ireland
A. C. Nielsen of Ireland Limited Ireland
A. C. Nielsen Italia S.p.A. Italy
C.R.A. S.r.l. Italy
Telepanel S.A. Italy
SITA, Societa per gli Indici Tessile e Abbigliamento-S.r.l. Italy 75.0
Management Tools S.r.l. Italy 60.0
<PAGE>
A. C. NIELSEN COMPANY (Continued)
A. C. Nielsen (Nederland) B.V. The Netherlands
ACNielsen Polen B.V. The Netherlands
ANR Amer Nielsen Research Sp. z..o.o. Poland
ACNielsen South Africa Holdings B.V. The Netherlands
ACNielsen South Africa B.V. The Netherlands
Nielsen Marketing Research spol, s.r.o. Czech Republic
Nederland Centrum voor Marketing Analyses B.V. The Netherlands 70.0
ZET-Nielsen Business Information A.S. Turkey 85.0
A. C. Nielsen (N.Z.) Limited New Zealand
AGB McNair Group Ltd. New Zealand
Media Research Services Ltd. New Zealand 75.0
Market Research (NZ) Ltd. New Zealand
ACNielsen Norge AS Norway 98.9
ACNielsen Reklame-Statistikk Norway 83.7
A. C. Nielsen de Panama S.A. Panama
A. C. Nielsen Peru S.A. Peru
ACNielsen Portugal - Estudos de Mercado, Lda. Portugal
A. C. Nielsen P.R. Inc. Puerto Rico
A. C. Nielsen Singapore Pte. Ltd. Singapore
A.C. Nielsen Company AB Sweden
A. C. Nielsen Management Services S.A. Switzerland
A. C. Nielsen S.A. Switzerland
Media Focus Switzerland 50.0
ACN/PIB Partners Connecticut 50.01
ANR Amer Nielsen Research Limited Cyprus 51.0
ANR Amer-Nielsen Research Hellas S.A. Greece 80.0
ART Holding, L.L.C. Delaware
<PAGE>
A. C. NIELSEN COMPANY (Continued)
Neslein Holding Spain C.V. The Netherlands
ACNielsen Holdings Spain B.V. The Netherlands
ASEE Nielsen Holding Spain Srl Spain
N&P Holdings Spain S.A. Spain
A. C. Nielsen Company S.A. Spain
Infoadex S.A. Spain 50.0
Panel Internacional S.A. Spain
Nielsen Holdings, Inc. Delaware
Nielsen Japan K.K. Japan
Nielsen Leasing Corporation Delaware
Panel International S.A. Delaware
Teollisuuden Tielopalvelu Industrial Intelligence Ltd. Oy Finland
A. C. Nielsen Finland Oy Finland
Finnpanel Oy Finland 50.0
A. C. NIELSEN COMPANY LIMITED England
ACNIELSEN HOLDING GmbH Germany
ACN Marketing Research Holding GmbH Germany
A. C. Nielsen GmbH Germany
A. C. Nielsen Werbeforschung S&P GmbH Germany
"P&S" Handelsberatung GmbH Germany
ACNIELSEN MARKETING RESEARCH INDIA PRIVATE LIMITED India
ACNielsen Research Services Private Limited India 70.0
CZT/ACN TRADEMARKS, L.L.C. Delaware 50.0
<PAGE>
ENTERTAINMENT DATA, INC. California
Entertainment Data France S.A.R.L. France
Entertainment Data GmbH Germany
Entertainment Data Espana S.L. Spain
ENTERTAINMENT DATA, INC. 2 California
ENTERTAINMENT DATA INTERNATIONAL LIMITED England
MARKET SHARE MEIDA SHIVUKI LTD. Israel 90.0
NESLEIN HOLDING, L.L.C. Delaware
NESLEIN HOLDING (AUSTRALIA) C.V. Australia
A. C. Nielsen (Holdings) Pty. Limited Australia
A. C. Nielsen Australia Pty. Limited Australia
AGB McNair Holdings Pty. Limited Australia
AGB Research Holdings Pty. Limited Australia
Tart Research Pty. Limited Australia
AGB McNair Pty. Limited Australia
McNair Anderson Associates Pty. Limited Australia
Marketing Insights Pty. Ltd. Australia
Nandette Pty. Limited Australia
Australian Independent Media Data Pty. Limited Australia 50.0
SRG HOLDINGS LIMITED Hong Kong
SRG Management Services Limited Hong Kong
ACNielsen China Ltd. Hong Kong
Shanghai SRG Ltd. China 80.0
Research Consulting Services Ltd. Hong Kong
SRG International (HK) Ltd. Hong Kong
<PAGE>
SRG HOLDINGS LIMITED (Continued)
SRG Management Services Limited (Continued)
SRG Research Services (HK) Ltd. Hong Kong
Survey Research Hong Kong Ltd. Hong Kong
Survey Research Asia Pacific Ltd. Hong Kong
Survey Research Taiwan Ltd. Taiwan
Survey Research Group Ltd. Hong Kong
SRG Guangzhou Ltd. China 92.0
Survey Research Group Pte. Ltd. Singapore
SRG Research Canada Ltd. Canada
D.J. Calhoun Marketing & Development Ltd. Canada 86.0
Recherches en Marketing (Quebec) Inc. Canada
P.T. SRI Nielsen Indonesia Indonesia
SRG Japan K.K. Japan
Hankook Research Company Korea 50.0
Survey Research Malaysia Sdn Bhd Malaysia
Target Marketing Promotions Sdn Bhd Malaysia
Consumer Pulse Inc. Philippines
Dealer Pulse Inc. Philippines
Media Pulse Inc. Philippines
Philippine Monitoring Services Inc. Philippines
Research Philippines Unisearch Inc. Philippines
Survey Research Singapore Pte. Ltd. Singapore
Deemar Company Ltd. Thailand
SRG Vietnam Ltd. Vietnam
SRG INTERNATIONAL LTD. New York
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in the registration statements of ACNielsen
Corporation on Forms S-8 (File Nos. 333-14085 and 333-14753) of our report dated
February 18, 1998 incorporated by reference in ACNielsen Corporation's Form 10-K
for the year ended December 31, 1997 and to all references to our Firm included
in this Form 10-K.
ARTHUR ANDERSEN LLP
Stamford, Connecticut
March 25, 1998
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the registration
statements of ACNielsen Corporation on Form S-8 (File Nos. 333-14085 and
333-14753) of our report dated September 16, 1996, on our audit of the combined
statements of operations, cash flows and shareholders' equity and financial
statement schedule of ACNielsen Corporation, as defined in the notes to the
financial statements, and for the year ended December 31, 1995.
COOPERS & LYBRAND L.L.P.
Stamford, Connecticut
March 25, 1998
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Robert J. Chrenc, Earl H. Doppelt and
Ellenore O'Hanrahan, and each of them, as his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign the name of such person in the capacity indicated
below opposite the name of such person to the Annual Report for the fiscal year
ended December 31, 1997 of ACNielsen Corporation on Form 10-K and any and all
amendments thereto and to file the same with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
or his or her substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
This Power of Attorney has been signed by the following persons in the
capacities indicated on February 19, 1998.
Name Title
/s/ Robert H. Beeby Director
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Robert H. Beeby
/s/ Michael P. Connors Director
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Michael P. Connors
/s/ Donald W. Griffin Director
- - -------------------------------
Donald W. Griffin
/s/ Thomas C. Hays Director
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Thomas C. Hays
/s/ Karen L. Hendricks Director
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Karen L. Hendricks
/s/ Robert M. Hendrickson Director
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Robert M. Hendrickson
/s/ Robert Holland, Jr. Director
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Robert Holland, Jr.
/s/ Robert J Lievense Director
- - -------------------------------
Robert J Lievense
/s/ John R. Meyer Director
- - -------------------------------
John R. Meyer
/s/ Brian B. Pemberton Director
- - -------------------------------
Brian B. Pemberton
/s/ Robert N. Thurston Director
- - -------------------------------
Robert N. Thurston
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<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 205,726
<SECURITIES> 0
<RECEIVABLES> 260,821
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 504,970
<PP&E> 448,653
<DEPRECIATION> 282,993
<TOTAL-ASSETS> 1,039,108
<CURRENT-LIABILITIES> 469,114
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0
0
<COMMON> 577
<OTHER-SE> 459,527
<TOTAL-LIABILITY-AND-EQUITY> 1,039,108
<SALES> 0
<TOTAL-REVENUES> 1,391,587
<CGS> 0
<TOTAL-COSTS> 1,366,831
<OTHER-EXPENSES> (38,537)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (5,251)
<INCOME-PRETAX> 68,544
<INCOME-TAX> 32,647
<INCOME-CONTINUING> 35,897
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 35,897
<EPS-PRIMARY> 0.62
<EPS-DILUTED> 0.62
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