SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
(X) Annual Report Pursuant to Section 13 or 15(d)
of the SecuritiesExchange Act of 1934
For the fiscal year ended December 31, 1998
or
( ) Transition Report Pursuant to Section 13 or 15(d)of the
Securities Exchange Act of 1934
For the Transition Period From to
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Commission file number 001-12277
ACNielsen Corporation
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(Exact name of registrant as specified in its charter)
Delaware 06-1454128
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(State of incorporation) (I.R.S. Employer Identification No.)
177 Broad Street, Stamford, CT 06901
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 961-3000.
Securities registered pursuant to Section 12(b)of the Act: None
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. X
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As of January 29, 1999, 57,547,453 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 29, 1999) was approximately
$1,311 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
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Parts I and II: Portions of Registrant's Annual Report
to Shareholders for the 1998 Fiscal Year.
Part III: Portions of Registrant's Proxy Statement
dated March 12, 1999.
The Index to Exhibits is located on Pages 16 to 18.
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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, and certain businesses acquired since the Distribution,
including ACNielsen BASES and ACNielsen EDI.
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 100 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 1998, more than 73% 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 distributors and manufacturers of consumer
packaged goods and other products, retailers and brokers, as well as 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,
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1998 1997 1996
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Retail Measurement $ 1,013 $ 989 $ 974
Customized Research 213 191 188
Media Measurement* 98 120 114
Consumer Panel 101 92 83
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Total $1,425 $1,392 $1,359
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* Reported revenue for media measurement declined in 1998, as a result of the
transfer of the Latin American media business to a joint venture (see page 4).
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The number of full-time equivalent employees of the Company at December
31, 1998 was approximately 20,700. Of this number, approximately 2,968 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 80
countries. Retail Measurement Services include scanning and retail audit
services, account level reports, decision support, 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. ("ACNielsen EDI"), a provider of box office information
for the motion picture industry. Based in Beverly Hills, California, ACNielsen
EDI provides overnight information on box office receipts to studios and
exhibitors in the U.S. motion picture industry. ACNielsen EDI also has
operations in the U.K., Germany, Spain, France, Mexico, Argentina and Australia.
The information provided by ACNielsen 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 other
Indexes specific to certain countries.
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.
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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.
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).
Decision Support
ACNielsen converts the data which it collects into insights yielding
competitive advantage for its clients. ACNielsen decision support software
offers a rich environment for display, manipulation, analysis and final
presentation through fast access to ACNielsen and clients' internal data. Its
decision support software can also uncover "exceptional" information through its
analytical modeling capabilities. ACNielsen information can be delivered on-line
and via other electronic media (CD-ROM, diskette), via the Internet, as well as
in printed reports.
ACNielsen INF*ACT Workstation software is an open, Windows-based,
analytical and applications development tool set used worldwide by ACNielsen's
clients. ACNielsen's SalesNet provides fast, easy access to pre-run reports and
charts delivered via the Internet.
ACNielsen also offers a series of Windows-based intelligent business
applications that enhance ACNielsen INF*ACT Workstation functionality, giving
clients the ability to plan, analyze and execute successful marketing and sales
programs. These applications include Opportunity Explorer, Business Review,
Spotlight, Category Manager, and others.
In addition, ACNielsen offers sophisticated category management tools
such as SPACEMAN and PRICEMAN.
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
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 June 1998, the Company acquired BBI Marketing Services, Inc.
("ACNielsen BASES"). ACNielsen BASES, the global leader in simulated test
marketing, provides fast moving consumer goods marketers with sales estimates
and diagnostic analysis for their new business initiatives. In addition, VANTIS
International Research, a business unit of ACNielsen BASES, focuses on
researching new business initiatives for non-fast moving consumer goods
marketers. The addition of ACNielsen BASES enhanced the Company's portfolio of
advanced modeling and analytical services.
In 1998, the Company launched Winning Brands, a proprietary research
product that helps clients manage and leverage their brand equity. Winning
Brands follows the successful 1997 introduction of Customer eQ, a product that
measures customer satisfaction and loyalty.
In addition to services at the country level and ACNielsen BASES
services, 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.
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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.
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, which are
marketed in 31 countries, 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 and transferred its Latin American media
business to the joint venture. The joint venture, operating in Latin America,
offers television audience measurement services in ten 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.
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 and, outside the United
States, comprises, more than 74,000 households in 17 countries that 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 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.
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Relationship Among ACNielsen, D&B and Cognizant after the Distribution
Prior to the Distribution, D&B, Cognizant and ACNielsen entered into
certain agreements (the "Spin 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 terms of certain
of these agreements, but is qualified by reference to the texts of such
agreements which were previously filed with the Securities and Exchange
Commission.
In June 1998, D&B changed its name to R.H. Donnelley Corporation and
spun off a company now named The Dun & Bradstreet Corporation ("New D&B"), and
Cognizant changed its name to Nielsen Media Research, Inc. ("NMR") and spun off
a company named IMS Health Incorporated ("IMS Health"). As required by the terms
of the Distribution Agreement referred to below, each of New D&B and IMS Health
has provided an undertaking to the Company to be jointly and severally liable
with its former parent company for any liabilities of such former parent company
arising out of the Spin Agreements.
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". It also 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.
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. See "Relationship Among
ACNielsen, D&B and Cognizant after the Distribution" above for information
regarding name changes and certain post-Distribution events affecting Cognizant
and D&B.
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 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 (now called NMR) and ACNielsen entered into the TAM Master
Agreement relating to the conduct of the television audience measurement
business (the "TAM Business").
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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 (November 1, 1999), 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.
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 Sofres in Europe and other companies, and is
expanding globally.
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 Sofres, GFK, AGB Media Services, and Video Research (Japan).
In Consumer Panel Services, significant competitors include IRI in the
United States, and the Europanel consortium, which includes Taylor Nelson
Sofres and GFK, operating in Europe. NPD also competes in this area.
Principal competitive factors include innovation, the quality,
reliability and comprehensiveness 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 73% of its revenues in 1998 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 an Intellectual Property Agreement ("the IP Agreement")
among D&B, Cognizant (now called NMR) and ACNielsen, entered into in connection
with the Distribution, 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.
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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
Certain statements contained herein or incorporated herein by reference
are forward looking. These may be identified by the use of forward-looking words
or phrases, such as "anticipate," "believe," "expect", "could," "should,"
"planned," "estimated," "potential," "target", "aim" and "goal," among others.
In addition, 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 forward-looking statements made by or on behalf of the
Company. Any such statement is qualified by reference to the following
cautionary statement.
Risks and uncertainties that may affect the operations, performance,
development and results of the Company's business include: (i) the availability
of retail sources that are willing to sell data to the Company at prices
acceptable to the Company; (ii) changes in general economic or competitive
conditions which impact the Company's clients' demand for the Company's
services; (iii) significant price and service competition; (iv) rapid
technological developments in the collection, manipulation and delivery of
information; (v) the Company's ability to complete the implementation of its
Year 2000 and Euro plans on a timely basis; (vi) the impact of foreign currency
rate fluctuations since so much of the Company's earnings are generated abroad;
(vii) the degree of acceptance of new product introductions; (viii) 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.
The risks and uncertainties that may affect the Company's assessment of
Year 2000 issues and new European currency issues (which issues are described in
Management's Discussion and Analysis of Financial Condition and Results of
Operations on pages 35 to 37 of the ACNielsen Corporation 1998 Annual Report)
include: (i) the complexity involved in ascertaining all situations in which
Year 2000 or new European currency issues may arise; (ii) the ability of the
Company to identify, assess, remediate, test and successfully implement all
relevant computer codes and embedded technology within the scheduled dates for
completion thereof; (iii) the ability of the Company to obtain the services of
sufficient personnel to execute the programs; (iv) possible increases in the
cost of personnel required to execute the programs; (v) delays in scheduled
deliveries of new hardware and software from third party suppliers; (vi) the
receipt and reliability of responses from suppliers, clients and others to whom
compliance inquiries are being made; (vii) the ability of material third parties
to bring their affected systems into compliance; and (viii) unforeseen events
which could delay timely implementation of the programs.
Developments in any of the areas referred to above 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 16 Operations by Geographic Segment on Page 54 of the 1998
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 NMR. ACNielsen's properties are
generally considered to be both suitable and adequate to meet current operating
requirements and virtually all space is being utilized.
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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.
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. Discovery is currently ongoing.
In connection with the IRI Action, D&B, Cognizant (the former parent
company of IMS) and the Company entered into an Indemnity and Joint Defense
Agreement (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 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.
8
<PAGE>
In June 1998 (i) D&B changed its name to R.H. Donnelley Corporation and
spun off (the "D&B Spin") a company now named The Dun & Bradstreet Corporation
("New D&B"), and (ii) Cognizant changed its name to Nielsen Media Research, Inc.
("NMR") and spun off (the "Cognizant Spin") a company named IMS Health
Incorporated ("IMS Health"). Pursuant to the terms of a Distribution Agreement
dated as of October 28, 1996 among the Company, D&B and Cognizant, New D&B was
required as a condition to the D&B Spin, and IMS Health was required as a
condition to the Cognizant Spin, to undertake to the Company to be jointly and
severally liable with its former parent company for, among other things, the
obligations of such former parent company under the Indemnity and Joint Defense
Agreement. Each of New D&B and IMS Health did provide such undertaking to
the Company.
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,
1999 and brief summaries of their business experience during the past five
years.
Name Title Age
Nicholas L. Trivisonno Chairman and Chief Executive Officer* 51
Robert J Lievense President and Chief Operating Officer* 53
Michael P. Connors Vice Chairman* 43
Earl H. Doppelt Executive Vice President and General Counsel 45
Robert J. Chrenc Executive Vice President and Chief Financial Officer 54
*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. 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.
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.
9
<PAGE>
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 Liquidity and
Capital Resources, Dividends and Common Stock Information in "Management's
Discussion and Analysis of Financial Condition and Results of Operations" on
Pages 35 and 37 of the 1998 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 1994 through 1998 set
forth in "Summary Financial Data" on Page 56 of the 1998 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 1998 Annual Report, which information is incorporated
herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company uses foreign exchange forward contracts to hedge
significant known transactional exposures. The Company conducts its business in
a wide variety of currencies. Foreign exchange forward contracts are designated
for established and committed transactions that are expected to occur in less
than one year. Gains or losses on such contracts were not material to the
consolidated financial statements for the years ended December 31, 1998 and
1997. The Company does not utilize derivative financial instruments for trading
or other speculative purposes.
The following table presents the notional amounts, fair values and
average exchange rates of the foreign exchange forward contracts outstanding at
December 31, 1998 (in thousands of U.S. dollars):
Notional Fair Average Foreign
Amounts Value Exchange Rates
Australian dollars $ 827 $ (9) 1.60650
Japanese yen 600 15 117.02920
German deutsche marks 482 (22) 1.77120
French francs 397 (19) 5.94980
Netherland guilders 149 (9) 2.02250
British pounds 125 9 0.57153
Spanish pesetas 93 (6) 153.25000
Italian lire 92 1 1666.60000
Other 529 (23)
-------------------------- ------------ ----------
Total $ 3,294 $ (63)
-------------------------- ------------ ----------
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Financial Statements and Schedule under Item 14 on Page 13.
10
<PAGE>
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 section entitled "Election of Directors" in the Company's proxy
statement dated March 12, 1999 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.
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 12, 1999 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 12, 1999 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 16 to 18, 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 25, 1999
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 Office)
(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 25, 1999
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, 1998 appearing on Pages 38 to 56 of
the 1998 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 1998 Annual
Report
------------ -------------
Report of Independent Public Accountants F-6 38
Statement of Management Responsibility
for Financial Statements F-6 38
As of December 31, 1998 and 1997:
Consolidated Balance Sheets F-8 40
For the years ended December 31, 1998, 1997 and 1996:
Consolidated Statements of Income 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, 1998 and 1997 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:
Report of Independent Public Accountants 14 --
ACNielsen Corporation and Subsidiaries:
II - Valuation and Qualifying Accounts for the years
ended December 31, 1998, 1997 and 1996 15 --
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 1998, 1997 and 1996 consolidated financial statements included in
ACNielsen Corporation's 1998 Annual Report incorporated by reference in this
Form 10-K, and have issued our report thereon dated February 1, 1999. Our audit
was made for the purpose of forming an opinion on those statements taken as a
whole. The 1998, 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 1, 1999
14
<PAGE>
<TABLE>
ACNIELSEN CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
for the years ended December 31, 1998, 1997, 1996
(In thousands)
<CAPTION>
- - ----------------------------------------------------- ------------------ --------------- --------------- --------------
COL. A COL. B COL. C COL. D COL. E
- - ----------------------------------------------------- ------------------ --------------- --------------- --------------
- - ----------------------------------------------------- ------------------ --------------- --------------- --------------
Balance Additions Balance
Beginning Charged to at End
Description of Period Operations Deductions(a) of Period
(b)
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
<S> <C> <C> <C> <C>
For the Year Ended December 31, 1998 $ 12,114 $ 4,140 $ 2,364 $ 13,890
========= ========= ========= =========
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
========= ========= ========= =========
<FN>
NOTE:
(a) Represents primarily the charge-off of uncollectible accounts for which a
reserve was provided. (b) Deductions in 1996 primarily related to bad debts in
Europe, for which a reserve was provided in 1995.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Balance Additions Balance
Beginning Charged to at End
Description of Period Operations Deductions of Period
================= =========== ============ ============ ===========
ACCRUALS FOR SPECIAL CHARGES:
<S> <C> <C> <C> <C>
For the Year Ended December 31, 1998
Postemployment Benefits/Workforce Reductions $ 13,200 $ 0 $ 10,097 $ 3,103
Contractual Obligations 8,769 0 3,529 5,240
Rationalize Product Lines 18,300 0 17,887 413
Facilities/Real Estate 5,300 0 5,052 248
========= ========= ========= =========
$ 45,569 $ 0 $ 36,565 (c) $ 9,004
========= ========= ========= =========
For the Year Ended December 31, 1997
Postemployment Benefits/Workforce Reductions $ 8,563 $ 12,400 $ 7,763 $ 13,200
Contractual Obligations 30,826 0 22,057 8,769
Asset Revaluations 3,580 0 3,580 0
Rationalize Product Lines 0 18,300 0 18,300
Facilities/Real Estate 0 5,300 0 5,300
========= ========= ========= =========
$ 42,969 $ 36,000 $ 33,400 $ 45,569
========= ========= ========= =========
For the Year Ended December 31, 1996
Postemployment Benefits $ 14,300 $ 0 $ 5,737 $ 8,563
Contractual Obligations 55,800 0 24,974 30,826
Asset Revaluations 3,580 0 0 3,580
========= ========= ========= =========
$ 73,680 $ 0 $ 30,711 $ 42,969
========= ========= ========= =========
<FN>
Note:
(c) Includes non-cash charges of $6,132 to rationalize product lines and
$1,130 for consolidation of facilities.
</FN>
</TABLE>
15
<PAGE>
INDEX TO EXHIBITS
Exhibit Number
Regulation S-K Description
3 Articles of Incorporation and By-laws.
(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 U.S. $250,000,000 *
Credit Agreement dated as of April 15,
1998 (incorporated herein by reference to
Exhibit 4(b) to the Company's Quarterly
Report on Form 10-Q for the quarterly
period ended June 30, 1998, 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 *
26, 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).
+This exhibit constitutes a management contract, compensatory plan,
or arrangement.
*Incorporated herein by reference to a previously filed document.
16
<PAGE>
Exhibit Number
Regulation S-K Description
(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).
(e) TAM Master Agreement dated as of October *
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 Company's Quarterly
Report on Form 10-Q for the quarterly
period ended March 31, 1998, Commission
File No. 001-12277).
(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 March 31, 1998,
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 under the 1996 +*
ACNielsen Corporation Key Employees'
Stock Incentive Plan (incorporated herein
by reference to Exhibit 10(q) 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.
17
<PAGE>
Exhibit Number
Regulation S-K Description
(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).
(t) Form of Option Agreement under the 1996 +
ACNielsen Corporation Non-Employee
Directors' Stock Incentive Plan (filed
herewith).
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).
1998 Annual Report (pages 33 to 56)
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 29,
1999
23 Consents of Experts and Counsel (filed herewith).
Consent of Arthur Andersen LLP
24 Power of Attorney (filed herewith).
Powers of Attorney dated February 18, 1999
27 Financial Data Schedule (filed herewith).
99 Other Exhibits
(a) Letter of Undertaking dated June 29, *
1998 from the New Dun & Bradstreet
Corporation to Cognizant Corporation and
ACNielsen Corporation(incorporated herein
by reference to Exhibit 99(a) to the
Company's Quarterly Report on Form 10-Q
for the quarterly period ended June 30,
1998, Commission File No. 001-12277).
(b) Letter of Undertaking dated June 29, 1998 *
from IMS Health Incorporated to The Dun &
Bradstreet Corporation and ACNielsen
Corporation (incorporated herein by
reference to Exhibit 99(b) to the Company's
Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 1998,
Commission File No. 001-12277).
+This exhibit constitutes a management contract, compensatory plan, or
arrangement.
*Incorporated herein by reference to a previously filed document.
18
<PAGE>
EXHIBIT 10(t)
NONQUALIFIED STOCK OPTION AGREEMENT
UNDER THE 1996 ACNIELSEN CORPORATION
NON-EMPLOYEE DIRECTORS' STOCK INCENTIVE PLAN
This nonqualified stock option agreement (the "Award Agreement") confirms the
nonqualified stock option award (the "Award") made as of ______________, under
the 1996 ACNielsen Corporation Non-Employee Directors' Stock Incentive Plan (the
"Plan") to
[Name of Director] (the "Participant")
of nonqualified stock options ("Options") to purchase the number of shares of
common stock, par value $0.01 per share, of ACNielsen Corporation (the
"Company"), prior to the expiration date(s) and at the Option price(s) per
share, all as set forth below.
The Options are not intended to be incentive stock options within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). These
Options may be exercised in whole or in part, from time to time, on or after the
date(s) indicated below with respect to (i) those number of shares set forth
opposite such date(s), plus (ii) those number of shares as to which the Options
could have been exercised earlier but were not so exercised.
Price Vesting Number of Expiration
Per Share Date Shares Date
----------- --------- ----------- ------------
Notwithstanding anything to the contrary in this Award Agreement, upon the
acquisition of 80% or more of all outstanding shares of Company common stock
pursuant to any tender or exchange offer for shares of Company common stock
(other than one made by the Company), whether the Company does or does not
support the offer, then all unvested Options will become immediately
exercisable. A tender or exchange offer filed with the Securities and Exchange
Commission on Form 14D-1 (or successor form) will be treated conclusively as a
tender or exchange offer for purposes of this Agreement.
The Options are issued in accordance with and are subject to the terms of the
Plan, which Plan is incorporated herein by reference, and are exercisable only
in accordance with the terms of this Award Agreement and the Plan. In accordance
with the terms of the Plan, except as waived by the Compensation Committee of
the Board of Directors of the Company, these Options are not transferable
otherwise than by will or the laws of descent and distribution and are
exercisable during the lifetime of the Participant only by the Participant.
IN WITNESS WHEREOF, ACNielsen Corporation has caused this Award Agreement to be
executed in duplicate by its officer thereunto duly authorized.
ACNIELSEN CORPORATION
By__________________________
Name:
Title:
The undersigned hereby accepts and agrees to all the terms and provisions of the
foregoing Award Agreement and acknowledges receipt of a copy of the Plan.
- - -------------- ---------------------------
Date Participant
EXHIBIT 11
ACNIELSEN CORPORATION
COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK
ON A DILUTED BASIS (a)
<TABLE>
<CAPTION>
Dollar Amounts in Millions, Except Per Share Data 1998 1997 1996
---- ---- ----
(Average share data in thousands)
<S> <C> <C> <C>
Weighted-average number of common shares outstanding 57,236 57,139 56,712
Dilutive effect of shares issuable as of year-end under stock option plans 2,010 976 243
Adjustment of shares applicable to stock options and stock appreciation rights
exercised during the year 588 254 27
============== ============== ==============
Weighted average number of shares on a diluted basis 59,834 58,369 56,982
============== ============== ==============
============== ============== ==============
Net Income $57.2 $35.9 $15.8
============== ============== ==============
============== ============== ==============
Earnings per share of common stock on a diluted basis $.96 $.62 $.28
============== ============== ==============
<FN>
(a) All periods prior to November 1, 1996 reflect the adjusted share and option
activity of The Dun and Bradstreet Corporation. Options to purchase 1,309,000
shares of common stock at share prices ranging from $26.19 to $27.75 and
1,864,788 shares of common stock at prices ranging from $16.08 to $17.05 per
share were outstanding at the end of the years 1998 and 1996, respectively, 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.
</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, 1998
Compared with Year-ended December 31, 1997
ACNielsen Corporation ("ACNielsen" or "the Company") reported net income of
$57,209, an increase of 59.4% from net income of $35,897 reported in 1997.
Diluted earnings per share in 1998 were $.96, up 54.8% from $.62 in 1997. Net
income includes an after-tax expense of $9,228 or $.15 per share for Year 2000
system modifications and a negative after-tax impact of $8,091 or $.14 per share
resulting from foreign currency translation.
Revenue increased 2.4% in 1998 to $1,425,396 from $1,391,587 in 1997,
reflecting a negative $90,192 impact from translating foreign currencies to the
U.S. dollar. In local currency, revenue advanced 8.9%. Total Americas revenue
increased 12.6% to $578,770 from $514,015, after a negative $15,972 impact from
foreign currency translation. In the United States, excluding the impact of the
acquisition of ACNielsen BASES and ACNielsen EDI, revenue grew 10.5%. Growth in
U.S. revenue was driven by continued strong sales of account-level services,
consumer panel services and new clients. Including results of the acquired
businesses, U.S. revenue grew 25.9% to $390,374 from $310,037. Revenue for the
Europe, Middle East and Africa ("EMEA") region increased 1.8%, to $589,620 from
$579,050, reflecting the negative $20,326 impact of foreign currency
translation. In local currency, the region achieved a 5.3% gain in revenue.
Asia Pacific's revenue declined 13.9%, to $257,006 from $298,522, reflecting
$53,894 in negative foreign currency translation impact and the difficult
economic climate. However, local-currency revenue increased 4.1%, despite
economic turmoil in a number of countries in the region.
ACNielsen reported operating income in 1998 of $91,631 compared with
operating income of $24,756 in 1997. Operating income in 1997 included a special
pre-tax charge of $36,000. Excluding the special charge in 1997, operating
income increased 50.8% to $91,631 from $60,756. Operating income in 1998
includes $15,911 of incremental Year 2000 costs.
The Company reported operating costs of $703,303 in 1998, a 2.6% decrease
from $722,035 in 1997. Expense growth was held down by the impact of the strong
U.S. dollar and productivity improvements, and the absence of costs from the
Company's Latin America media business, partially offset by the inclusion in
1998 of expenses of acquired companies.
Selling and administrative expenses of $528,673 increased 2.5% from
$515,938 reported in 1997, reflecting the favorable impact of currency
translation. Excluding the impact of foreign currency translation and
acquisitions, selling and administrative expenses increased about 5%.
ACNielsen reported other income-net of $6,985 compared with other
income-net of $43,788 in 1997. Other income-net in 1997 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 $2,236,
reflecting lower interest rates on borrowings, and interest income earned from
notes receivable from IBOPE Media Information ("IBOPE"). The notes were partial
consideration for the business assets that were transferred to IBOPE in the
first quarter of 1998.
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 and
$29,800 in Asia Pacific, including $22,300 for ACNielsen Japan.
Total Americas revenue increased 12.6% in 1998 to $578,770 from $514,015 in
1997, driven by continued robust growth in the United States. In local currency,
the region's revenue increased 15.7%. Operating income for the Americas region
increased 63.9% to $70,838 from $43,233 as the United States more than doubled
its operating income and Canada and Latin America delivered strong improvements.
Revenue in the United States increased 25.9% reflecting the acquisition of
ACNielsen BASES (acquired in June 1998) and ACNielsen EDI (acquired in December
1997), strong demand for account-level information; growth in consumer panels,
particularly from new syndicated services; and the addition of new clients. In
the United States, operating income more than doubled, to $39,041 from $19,510,
driven by strong revenue growth and income from acquisitions. Excluding the
results of acquisitions, operating income for the United States increased 74.6%
to $34,064. In Canada and Latin America, revenue declined 7.6%, due to the
absence of revenue from the Company's Latin America media business, which was
transferred to the IBOPE joint venture during the first quarter of 1998, and a
$15,972 negative impact from foreign currency translation. Local currency
revenue was up 0.2%, as higher retail measurement sales in Canada, Colombia,
Mexico and Brazil offset the absence of the media revenue. Despite a negative
currency translation impact of $4,339, operating income grew 34.0%, to $31,797
from $23,723, benefiting from continued operational and cost efficiencies,
income from customized research studies for the Mexican government, and the
elimination of losses from the transferred media business. This strong increase
resulted in an operating margin of 16.9%.
EMEA's revenue was up 1.8% to $589,620 from $579,050 in 1997, after
absorbing a negative $20,326 foreign currency translation impact. Excluding the
impact of the strong U.S. dollar, EMEA revenue increased 5.3%, driven by 37.5%
growth in the emerging markets of Eastern Europe, along with higher revenue in
the United Kingdom, France, South Africa, Turkey and Finland, and the addition
of revenue from ACNielsen EDI. Operating income of $29,158 was 37.6% higher than
operating income for 1997, including a negative $1,013 impact from foreign
currency translation.
Asia Pacific's revenue, including ACNielsen Japan, decreased 13.9% to
$257,006 from $298,522 in 1997, but despite economic turmoil in a number of
countries, local currency revenue grew 4.1%. Local currency revenue growth in
the region was attributable to China and the Philippines, new revenue from
India, higher sales of retail and media measurement services in the Pacific
sub-region, and customized research services in Japan. The region reported
operating income of $7,546, compared with an operating loss of $3,669 in 1997.
The substantial improvement was attributed to the performance of ACNielsen
Japan, which nearly broke even after reporting a $10,598 operating loss in 1997;
improved region-wide operating efficiency and productivity; higher margins in
customized research; and the introduction of proprietary products. Local
currency operating income increased by $19,788, before a negative impact of
$8,573 from foreign currency translation.
F-1
<PAGE>
Year-ended December 31, 1997
Compared with Year-ended December 31, 1996
ACNielsen 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 were
$.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 EMEA region declined 3.1%, 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, including ACNielsen Japan, increased 3.3%,
despite the devaluation of several Southeast Asia currencies against the U.S.
dollar, and grew 9.2% 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 costs to 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 $722,035 in 1997, a slight increase
from $721,109 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 $515,938 were essentially flat, with
$516,206 reported in 1996, reflecting the favorable impact of currency
translation. Excluding the impact of foreign currency translation, selling and
administrative expenses increased about 5.1%.
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, and
$29,800 in Asia Pacific, including $22,300 for 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.
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, overall cost reductions, and
improved results in the United Kingdom and France.
Asia Pacific's revenue, including ACNielsen Japan, increased 3.3% to
$298,522 in 1997, from $288,937 in 1996, but grew 9.2% 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. The region's operating loss declined to $3,669 from a loss of $10,971
in 1996 reflecting the region's continued focus on client service, operating
efficiency and profitability, and improved results at ACNielsen Japan.
Income Taxes - The Company's income tax provision was $41,407, $32,647 and
$14,650 in 1998, 1997, and 1996, respectively. Excluding the impact on the tax
provision of the special charge and gains on sale of investments in 1997, the
Company's effective tax rates were 42.0%, 45.2% and 48.0%, in 1998, 1997, and
1996, respectively. The decrease in the effective tax rate reflected the impact
of global tax planning strategies. 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 8 to the
Consolidated Financial Statements.)
New Accounting Pronouncements Adopted in 1998 - The Company has adopted
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income," which establishes standards for reporting and display of
comprehensive income and its components in the financial statements. Earlier
periods have been restated to conform with the standards set forth in SFAS No.
130. (See the Consolidated Statements of Shareholders' Equity.)
In addition, the Company adopted 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.
131 is effective for fiscal years beginning after December 31, 1997. (See Note
16 to the Consolidated Financial Statements.)
The Company has adopted SFAS No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits." This statement revises employers'
disclosures about pension and other postretirement benefit plans. It does not
change measurement or recognition provisions for those plans. (See Note 6 to the
Consolidated Financial Statements.)
New Accounting Pronouncements Not Yet Adopted - In April 1998, the American
Institute of Certified Public Accountants issued Statement of Position (SOP)
98-5, "Reporting on the Costs of Start-Up Activities." The SOP, which the
Company plans to adopt on January 1, 1999, requires that costs of start-up
activities be expensed as incurred. The Company currently capitalizes certain
one-time costs related to introducing new services and conducting business in
new geographic areas. Adoption of this SOP is expected to result in a one-time,
non-cash, after-tax charge of approximately $20,000 (or $.34 per diluted share),
which will be recorded as a cumulative effect of a change in accounting
principle. However, adoption of the new accounting policy is not expected to
have a material impact on the Company's future results of operations.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." The statement
F-2
<PAGE>
establishes accounting and reporting standards requiring that every derivative
instrument (including certain derivative instruments embedded in other
contracts) be recorded in the balance sheet as either an asset or liability
measured at its fair value. The statement requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
allows a derivative's gains and losses to offset related results on the hedged
item in the income statement, and requires that a company document, designate,
and assess the effectiveness of transactions that receive hedge accounting.
SFAS No. 133 is effective for fiscal years beginning after June 15, 1999.
However, the Company expects to adopt the new statement effective January 1,
1999. Based on the Company's derivative positions at December 31, 1998, the
Company does not anticipate that the adoption of the new statement will have a
material effect on earnings or the financial position of the Company.
Non-U.S. Operating and Monetary Assets - ACNielsen operates globally.
Nearly 73% and 80% of ACNielsen's revenue was generated from non-U.S. operations
during 1998 and 1997, respectively. During 1998, EMEA and Asia Pacific
operations (including Japan) contributed 41% and 18% of reported Company
revenue, respectively, while revenue from countries in Latin America comprised
less than 10% of consolidated revenue. 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 U.S. dollar operating results in the future. In
1998 and 1997, foreign currency translation decreased U.S. dollar revenue growth
by approximately 6.5% and 6.1%, respectively. Operating income growth in 1998
and 1997 was reduced by approximately $14,000 and $11,000, respectively.
ACNielsen has entered into foreign exchange forward contracts to hedge
against significant known transactional exposures. (See Note 10 to the
Consolidated Financial Statements.)
Non-U.S. monetary assets are maintained in currencies other than the U.S.
dollar, principally in Australia, Italy, Spain, Germany and the Netherlands.
Changes in the value of these currencies relative to the U.S. dollar are charged
or credited to shareholders' equity. In 1998, the economies of 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.) The effect
of exchange rate changes decreased the U.S. dollar amount of cash and cash
equivalents by $5,393 in 1998 and $13,186 in 1997.
Liquidity and Capital Resources - At December 31, 1998, cash and cash
equivalents totaled $100,533, a decrease of $105,193 from December 31, 1997, and
short-term debt totaled $49,032, an increase of $23,075 from December 31, 1997.
The decrease in cash at December 31, 1998 reflects $105,448 paid for the
acquisition of businesses, $29,515 paid for treasury stock repurchases, $29,303
paid related to special charges and $17,517 paid for postemployment benefits. In
1999, the Company expects cash outlays related to the 1997 special charge of
$3,764. In addition, the Board of Directors has authorized the Company to
repurchase its common stock up to the amount permitted by the Indemnity and
Joint Defense Agreement. (See Note 11 to the Consolidated Financial Statements.)
Net cash provided by operating activities aggregated $123,859, $93,870 and
$119,220 in 1998, 1997 and 1996, respectively. The increase in cash provided by
operating activities in 1998 reflected increased cash from operations, a
reduction in payments related to special charges ($4,097) and lower cash paid
for income taxes ($9,370).
Net cash used in investing activities totaled $223,052 for 1998 compared
with $56,071 and $69,145 in 1997 and 1996, respectively. The increase in cash
usage in 1998 of $166,981 reflected an increase of $75,264 paid for business
acquisitions, the absence of proceeds from sale of investments ($45,899), an
increase in spending for computer software ($19,846), and a higher level of
capital spending and project costs (included in other investing), partially to
support geographic expansion.
Capital expenditures totaled $55,375, $48,427 and $65,503 in 1998, 1997 and
1996, respectively. The increase in capital expenditures in 1998 reflects the
relocation of several facilities in Asia Pacific and the expansion of television
audience measurement (TAM) and consumer panel services. The lower level of
capital expenditures in 1997 reflects the Company's active asset management
program.
Net cash (used in) provided by financing activities totaled ($607),
($3,892) and $51,749 in 1998, 1997, and 1996, respectively. In 1996, transfers
from D&B of $46,210 included cash received in connection with the Distribution.
During the first quarter of 1998, the Company became a partner in a joint
venture that provides media measurement services in Latin America. The joint
venture, IBOPE, offers TAM, radio audience measurement (RAM), and advertising
expenditure measurement services (AEM) in various Latin American markets. Under
the terms of the agreement, the Company received an 11% equity interest in the
joint venture and $12,772 of interest bearing notes in exchange for the
Company's Latin America TAM, RAM and AEM business assets and the assumption of
certain transition liabilities in a non-cash transaction. The Company is
accounting for its investment in the joint venture on the cost basis.
The Company provides for its normal capital and operating expenditure needs
through internally generated funds, existing cash reserves, and bank credit
facilities. 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 9 to the Consolidated Financial Statements.) Prior
to the Distribution, as a subsidiary of D&B, funding for the Company's U.S. and
many non-U.S. operations was provided by internally generated funds and
financing obtained through D&B. 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 Year 2000 problem concerns the inability of older computer systems to
properly recognize and process date-sensitive information beyond December 31,
1999. If not corrected, businesses and other entities relying on such computer
systems are at risk for possible miscalculations or systems failures that could
cause disruptions in their business operations.
ACNielsen's business relies substantially on information technology systems
("IT Systems") and, to a lesser degree, on other systems that contain embedded
technology ("Non-IT Systems"). As a global leader in delivering market research,
information and analysis to the consumer products and services industries,
ACNielsen uses IT Systems and Non-IT Systems (collectively, "Technology
Systems") to gather data from data suppliers, analyze such data and deliver
information products to its clients. The Company also provides software to its
clients for use in connection with the delivery and analysis of ACNielsen data.
Technology Systems are also used by the Company for its own internal operations.
Accordingly, the Year 2000 issue could arise at many stages in the Company's
supply, processing, distribution and financial chains.
The Company's State of Readiness - The Company is in the process of
implementing a Year 2000 readiness program with the goals of (i) having all of
its Technology Systems functioning properly with respect to Year 2000 before
January 1, 2000, and (ii) identifying and minimizing the other business risks
created by the Year 2000 issue. The Company currently believes that it will be
able to
F-3
<PAGE>
modify or replace all of its material Technology Systems in a timely manner and
with no significant disruptions to its operations. It also believes that its
Year 2000 readiness program should significantly reduce the adverse effects of
the Year 2000 issue for the Company. However, given the general uncertainties
inherent in the Year 2000 problem including, among other things, uncertainties
as to the Year 2000 readiness of material third-party suppliers and clients, it
is possible that the business and results of operations of the Company could be
materially adversely affected by an inability of the Company to conduct its
business in the ordinary course for a period of time after December 31, 1999.
The Company's Year 2000 readiness program comprises eight principal phases,
these being (i) inventory, (ii) assessment, (iii) analysis and planning, (iv)
remediation, (v) testing, (vi) implementation, (vii) communication, and (viii)
contingency planning.
The inventory phase comprises the development of a complete list of all
components of the Company's Technology Systems that are used in the collection,
processing and delivery of ACNielsen products and services or that are used in
the administration of its general business activities. The inventory phase is
substantially complete.
The assessment phase comprises the evaluation of each item on the inventory
to determine if it is affected by the Year 2000 problem and, if it is, to
determine the most appropriate remediation approach. There are generally four
alternative approaches: (i) renovation; (ii) retirement; (iii) re-engineering;
or (iv) replacement. The assessment phase is also substantially complete and,
based on the results of the assessment, the Company determined that it would be
required to renovate, retire, re-engineer or replace significant portions of its
Technology Systems to make them Year 2000 compliant.
The analysis and planning phase comprises the development of detailed plans
and timetables to accomplish the required remediation actions identified during
the assessment phase and the assignment of the internal or external resources
required to achieve compliance within the planned timeframes. This phase, which
includes the prioritization of systems for remediation activities, is
substantially complete.
The remediation phase comprises the actual renovation, re-engineering,
retirement or replacement of affected systems. This phase is in progress and
proceeding based upon the original prioritization. Because of the number of
systems, countries and business segments involved and the varying importance of
different systems to the Company's business and results of operations, it is
difficult to quantify precisely the status of completion of this phase on an
overall Company basis. However, the Company believes that a majority of the work
required by this phase has been completed. Plans are for the remediation phase
to be substantially completed in the first quarter of 1999.
The testing phase, which follows remediation, comprises the establishment
of Year 2000 test environments to do systems and user testing of individual
components, as well as complete end-to-end system testing, of the Company's
Technology Systems. In addition, it includes testing of interfacing systems used
by certain external suppliers and clients. This testing phase has begun for a
number of major systems throughout the world. Detailed Year 2000 plans call for
testing of the Company's Technology Systems to be completed during the first two
quarters of 1999. Testing of systems used by external suppliers and clients is
expected to continue to the Year 2000.
The implementation phase, which follows testing, comprises the actual
implementation into the production environment of the compliant Technology
Systems. For products and services provided by the Company to clients, this
phase includes the implementation of the compliant versions of hardware,
software, and communications services into production in the client
environments. This phase is at various stages around the world but overall is in
the early stages of execution. Plans for each country and business segment have
been developed to allow for adequate time to achieve implementation prior to the
end of 1999.
The communication phase comprises the implementation, coordination and
management of a communications process to communicate with clients and other
third parties whose Year 2000 state of readiness could significantly affect the
Company. Several levels and types of communications are involved, including
communications with clients, vendors and other service providers. Communications
with clients include communications regarding (i) the implementation of Year
2000 compliant versions of ACNielsen software used by the client, (ii) the state
of readiness of systems used by the client to receive or analyze ACNielsen data,
and (iii) the state of readiness of ACNielsen Technology Systems that are used
to compile and deliver data to the client. Vendor communications include
communications with (i) data suppliers to assess the Year 2000 status of the
systems they use to compile and deliver data to the Company, (ii) data
processors to assess the Year 2000 status of their processing and delivery
systems, and (iii) providers of third-party Technology Systems to establish
plans and timetables for the delivery of Year 2000 compliant versions of those
Technology Systems. Communications with other service providers include
communications with utilities, providers of facilities and environmental
systems, banks and other material service providers to assess their Year 2000
readiness insofar as it may affect the services they provide to the Company. The
communication phase with respect to supplier readiness is well underway in all
major countries. Communications efforts will continue to determine the state of
readiness of material third parties. During the fourth quarter of 1998, the
Company engaged in increased communications with clients to assess their
readiness as well as to plan implementation of ACNielsen Year 2000 compliant
versions of software and information products and the Company expects that such
communications will continue to the Year 2000.
The final phase is the development of contingency and business continuation
plans for each organization and company location. In general, contingency
planning began during the fourth quarter of 1998 and the goal is to complete
such plans by the end of the first quarter of 1999. Although the Company
anticipates being able to develop contingency plans to deal with certain
situations, it is not yet possible to determine if contingency plans can be
developed and/or successfully implemented to deal with all material risks.
Year 2000 Issues - As mentioned above, Year 2000 issues could arise at many
stages in the Company's supply, processing, distribution, and financial chains.
With respect to data supplies, certain data used by the Company are
collected manually. However, significant amounts of data, including all retail
scanning data and the majority of television audience measurement and consumer
panel services data, are collected and transmitted electronically to ACNielsen
or to its third-party data processors. A Year 2000 risk, therefore, is that data
supplies could be disrupted due to Year 2000 problems with the Technology
Systems of data suppliers or of the Company.
Once data has been collected, it is generally transmitted electronically to
ACNielsen or third-party data processors, then analyzed and processed and
finally transmitted electronically to the client. Accordingly, other Year 2000
risks include possible disruptions in data processing and transmission
capabilities. Also, certain clients use their own Technology Systems to analyze
ACNielsen data. Revenue, therefore, could be affected in the event that clients
are unable for some period of time to make normal use of the Company's products
and services.
Additional Year 2000 risks include disruptions in the Company's own
internal operations, including financial and administrative systems, and in
critical services and utilities on which the Company relies, such as
electricity, telephone systems, and banking services.
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<PAGE>
The most reasonably likely worst case scenarios that the Company has
identified include lost revenue and profits due to (i) non-receipt of, or
temporary delays in receiving, scanning data from data suppliers, (ii) delays in
deliveries to clients due to data supply, processing and/or transmission
problems, and (iii) non-compliance of clients' Technology Systems such that they
are unable to make normal use of the Company's products and services. The
Company does not currently anticipate that any such effects would be of a
long-term nature.
Costs - Incremental Year 2000 compliance costs, primarily for maintenance
and system modifications, are presently estimated to be between $6,000 and
$9,000 for 1999. Such costs totaled $15,911 for the year ended December 31,
1998. Costs to acquire new software and computer systems in advance of their
normal replacement schedules are estimated to total between $10,000 and $15,000
over 1998 and 1999. At December 31, 1998, $5,407 had been incurred. The Company
does not separately track internal costs that are not related to incremental
Year 2000 activities. Such costs are principally for payroll.
Euro
The introduction of a common currency across eleven European countries, the
"Euro," will have a significant impact on the European marketplace and on the
operations of a number of the Company's key clients and data suppliers. The
introduction is on a phased basis between January 1999 and January 2002, at
which date full notes and coinage in Euros will be issued and, no later than
July 1, 2002, will replace existing local currencies.
As the Company has operations in all of the affected countries, it also
will be impacted by the Euro's introduction. The Company has established a
multi-functional, cross-border taskforce for the purpose of preparing the
Company for the introduction of the Euro. As part of its Euro readiness efforts,
the Company has assessed the capabilities of its existing internal processes and
software systems to deal with the introduction of the Euro. Changes to internal
processes relating to accounting, billing, production and delivery systems, and
supporting software changes, required to meet the initial introduction were
substantially completed in the fourth quarter of 1998. Additional modifications
will be made as the phase-in period progresses.
The Company is communicating with its principal data and other suppliers,
including its banks, and with its principal clients to assess both their own
level of readiness and their requirements over the transitional period and
beyond. These communications will be ongoing as the phase-in period progresses.
Preliminary estimates of the total incremental Euro compliance costs in
respect of internal and production systems are that they will not be material.
Implementation efforts will continue in line with the phased adoption of the
Euro over the transition period, and the related costs will be expensed as
incurred. The Company has not yet developed a contingency plan.
If the Company failed to successfully address the issues raised by the
Euro's introduction, it could have a material adverse effect on the Company.
However, based on progress to date and the Company's Euro readiness program, the
Company currently does not anticipate any material adverse effects as a result
of the Euro's introduction.
Forward-Looking Statements - Certain statements contained in this Annual
Report are forward looking. These may be identified by the use of
forward-looking words or phrases, such as "anticipate," "believe," "expect,"
"could," "should," "planned," "estimated," "potential," "target," "aim" and
"goal," among others. 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 forward-looking statements made by or on
behalf of the Company. Any such statement is qualified by reference to the
following cautionary statement.
Risks and uncertainties that may affect the operations, performance,
development and results of the Company's business include: (i) the availability
of retail sources that are willing to sell data to the Company at prices
acceptable to the Company; (ii) changes in general economic or competitive
conditions which impact the Company's clients' demand for the Company's
services; (iii) significant price and service competition; (iv) rapid
technological developments in the collection, manipulation and delivery of
information; (v) the Company's ability to complete the implementation of its
Year 2000 and Euro plans on a timely basis; (vi) the impact of foreign exchange
rate fluctuations since so much of the Company's earnings are generated abroad;
(vii) the degree of acceptance of new product introductions; (viii) the
uncertainties of litigation, including the IRI lawsuit; as well as other risks
and uncertainties detailed from time to time in the Company's Securities and
Exchange Commission filings.
The risks and uncertainties that may affect the Company's assessment of
Year 2000 issues and new European currency issues include: (i) the complexity
involved in ascertaining all situations in which Year 2000 or new European
currency issues may arise; (ii) the ability of the Company to identify, assess,
remediate, test and successfully implement all relevant computer codes and
embedded technology within the scheduled dates for completion thereof; (iii) the
ability of the Company to obtain the services of sufficient personnel to execute
the programs; (iv) possible increases in the cost of personnel required to
execute the programs; (v) delays in scheduled deliveries of new hardware and
software from third-party suppliers; (vi) the receipt and reliability of
responses from suppliers, clients and others to whom compliance inquiries are
being made; (vii) the ability of material third parties to bring their affected
systems into compliance; and (viii) unforeseen events which could delay timely
implementation of the programs.
Developments in any of the areas referred to above 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.
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 14 to the
Consolidated Financial Statements.) 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 the Indemnity and Joint Defense
Agreement. 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 years ended December 31, 1998
and December 31, 1997, 34,481,200 and 45,113,800 shares were traded,
respectively. The number of shareholders of record at January 29, 1999 and
January 31, 1998 were 6,244 and 9,676, respectively. The following summarizes
the high and low prices per share as reported in the periods shown:
1998 1997
High Low High Low
- - -----------------------------------------------------------------------
First Quarter $26 7/16 $20 1/2 $17 1/8 $14 5/8
Second Quarter $29 1/16 $24 7/16 $19 5/8 $14 1/8
Third Quarter $28 1/8 $19 11/16 $24 3/16 $19
Fourth Quarter $28 15/16 $20 7/16 $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 (a Delaware corporation) and its subsidiaries (the "Company") as of
December 31, 1998 and 1997, and the related Consolidated Statements of Income,
Cash Flows and Shareholders' Equity for each of the three years in the period
ended December 31, 1998. 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.
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, 1998 and 1997, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1998, in
conformity with generally accepted accounting principles.
/s/ Arthur Andersen L.L.P.
Stamford, Connecticut
February 1, 1999
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
control 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 INCOME
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------
(Amounts in thousands, except per share data) 1998 1997 1996
=============================================================================================
<S> <C> <C> <C>
Operating Revenue $ 1,425,396 $ 1,391,587 $ 1,358,644
- - ---------------------------------------------------------------------------------------------
Costs and Expenses:
Operating Costs 703,303 722,035 721,109
Selling and Administrative Expenses 528,673 515,938 516,206
Depreciation and Amortization 85,878 92,858 93,174
Year 2000 Expenses 15,911 -- --
Special Charge -- 36,000 --
- - ---------------------------------------------------------------------------------------------
Total Costs and Expenses 1,333,765 1,366,831 1,330,489
- - ---------------------------------------------------------------------------------------------
Operating Income 91,631 24,756 28,155
- - ---------------------------------------------------------------------------------------------
Interest Income 9,695 8,431 8,357
Interest Expense (1,935) (3,180) (5,209)
Gain on Sale of Investments -- 39,039 --
Other Expense-Net (775) (502) (809)
- - ---------------------------------------------------------------------------------------------
Other Income-Net 6,985 43,788 2,339
- - ---------------------------------------------------------------------------------------------
Income Before Provision for Income Taxes 98,616 68,544 30,494
Provision for Income Taxes 41,407 32,647 14,650
- - ---------------------------------------------------------------------------------------------
Net Income $ 57,209 $ 35,897 $ 15,844
=============================================================================================
Actual and Pro Forma Earnings
Per Share of Common Stock:
Basic $ 1.00 $ .63 $ .28
Diluted $ .96 $ .62 $ .28
- - ---------------------------------------------------------------------------------------------
Actual and Pro Forma
Weighted-Average Number of Shares Outstanding:
Basic 57,236 57,139 56,712
Diluted 59,834 58,369 56,982
=============================================================================================
</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) 1998 1997
===================================================================================================================================
<S> <C> <C>
Assets
Current Assets
Cash and Cash Equivalents $ 100,533 $ 205,726
Accounts Receivable-Net 279,708 260,821
Other Current Assets 56,527 38,423
- - -----------------------------------------------------------------------------------------------------------------------------------
Total Current Assets 436,768 504,970
- - -----------------------------------------------------------------------------------------------------------------------------------
Notes Receivable and Other Investments 28,230 10,281
- - -----------------------------------------------------------------------------------------------------------------------------------
Property, Plant and Equipment-Net 157,664 165,660
- - -----------------------------------------------------------------------------------------------------------------------------------
Other Assets-Net
Prepaid Pension 62,152 57,425
Computer Software 42,588 25,288
Intangibles and Other Assets 69,889 55,001
Goodwill 328,326 220,483
- - -----------------------------------------------------------------------------------------------------------------------------------
Total Other Assets-Net 502,955 358,197
- - -----------------------------------------------------------------------------------------------------------------------------------
Total Assets $ 1,125,617 $ 1,039,108
===================================================================================================================================
Liabilities and Shareholders' Equity
Current Liabilities
Accounts Payable $ 90,931 $ 86,908
Short-Term Debt 49,032 25,957
Accrued and Other Current Liabilities 308,396 301,522
Accrued Income Taxes 48,901 42,385
- - -----------------------------------------------------------------------------------------------------------------------------------
Total Current Liabilities 497,260 456,772
- - -----------------------------------------------------------------------------------------------------------------------------------
Postretirement and Postemployment Benefits 44,388 49,400
Deferred Income Taxes 55,486 39,951
Other Liabilities 40,435 32,881
- - -----------------------------------------------------------------------------------------------------------------------------------
Total Liabilities 637,569 579,004
- - -----------------------------------------------------------------------------------------------------------------------------------
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-58,868,399 and 57,730,273 shares for 1998 and 1997, respectively 589 577
Series Common Stock-par value $.01 per share, authorized-5,000,000 shares;
issued-none -- --
Additional Paid-In Capital 492,365 471,493
Retained Earnings 100,829 43,620
Treasury Stock, at cost, 1,470,991 and 266,666 shares for 1998 and 1997, respectively (33,481) (3,966)
Accumulated Other Comprehensive Income:
Cumulative Translation Adjustment (72,254) (51,620)
- - -----------------------------------------------------------------------------------------------------------------------------------
Total Shareholders' Equity 488,048 460,104
- - -----------------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $ 1,125,617 $ 1,039,108
===================================================================================================================================
</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) 1998 1997 1996
===================================================================================================================================
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 57,209 $ 35,897 $ 15,844
Reconciliation of Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 85,878 92,858 93,174
Deferred Income Taxes 3,214 7,062 11,598
Special Charge -- 36,000 --
Payments Related to Special Charges (29,303) (33,400) (30,711)
Postemployment Benefit Expense 7,542 227 3,077
Postemployment Benefit Payments (17,517) (15,495) (21,275)
Net Increase in Accounts Receivable (6,362) (10,609) (802)
Gain on Sale of Investments -- (39,039) --
Net Decrease in Other Working Capital Items 31,690 28,249 58,682
Other (8,492) (7,880) (10,367)
- - -----------------------------------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 123,859 93,870 119,220
- - -----------------------------------------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities:
Proceeds from Sale of Investments -- 45,899 --
Payments for Acquisition of Businesses (excluding cash and cash
equivalents acquired of $1,127 in 1998 and $2,270 in 1997) (105,448) (30,184) (946)
Capital Expenditures (55,375) (48,427) (65,503)
Additions to Computer Software (34,620) (14,774) (24,450)
(Increase) Decrease in Other Investments (915) 289 2,530
Other (26,694) (8,874) 19,224
- - -----------------------------------------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities (223,052) (56,071) (69,145)
- - -----------------------------------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities:
Net Transfers from The Dun & Bradstreet Corporation -- -- 46,210
Increase (Decrease) in Short-Term Borrowings 13,850 (9,718) 9,758
Treasury Stock Purchases (29,515) -- (3,966)
Proceeds from the Sale of Common Stock under Option Plans 15,128 5,700 1,335
Other (70) 126 (1,588)
- - -----------------------------------------------------------------------------------------------------------------------------------
Net Cash (Used in) Provided by Financing Activities (607) (3,892) 51,749
- - -----------------------------------------------------------------------------------------------------------------------------------
Effect of Exchange Rate Changes on Cash and Cash Equivalents (5,393) (13,186) (6,387)
- - -----------------------------------------------------------------------------------------------------------------------------------
(Decrease) Increase in Cash and Cash Equivalents (105,193) 20,721 95,437
Cash and Cash Equivalents, Beginning of Year 205,726 185,005 89,568
- - -----------------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents, End of Year $ 100,533 $ 205,726 $ 185,005
===================================================================================================================================
Supplemental Disclosure of Cash Flow Information:
Cash Paid During the Year for Interest $ 1,526 $ 3,014 $ 5,272
Cash Paid During the Year for Income Taxes $ 32,731 $ 42,101 $ 57,736
- - -----------------------------------------------------------------------------------------------------------------------------------
Noncash Investing and Financing Activities:
Acquisition of Investment and Notes Receivable in exchange for
Business Assets and Liabilities $ 21,612 -- --
===================================================================================================================================
</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>
Additional Treasury
(Dollar amounts in thousands) Divisional Common Paid-In Stock, Retained
Three Years Ended December 31, 1998 Equity Stock Capital at cost Earnings
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1996 $ 406,098
Comprehensive Income:
Net Income for period ended October 31, 1996 8,121
Other Comprehensive Income
Unrealized Gains on Investments for
period ended October 31, 1996(1)
Cumulative Translation Adjustment for
period ended October 31, 1996
Comprehensive Income for period ended October 31, 1996
Net Transfers from The Dun & Bradstreet Corporation 46,210
Stock Distribution to Holders of Dun &
Bradstreet Stock (57,019,180 shares) (460,429) $570 $459,859
- - ------------------------------------------------------------------------------------------------------------------------------------
Balance, November 1, 1996 570 459,859
Comprehensive Income:
Net Income for period ended December 31, 1996 $ 7,723
Other Comprehensive Income
Unrealized Losses on Investments for
period ended December 31, 1996(1)
Cumulative Translation Adjustment for
period ended December 31, 1996
Comprehensive Income for period ended December 31, 1996
Treasury Stock Purchased (266,666 shares) $ (3,966)
Activity under Stock Plans (105,239 shares),
including tax benefits 1 1,334
- - ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 571 461,193 (3,966) 7,723
Comprehensive Income:
Net Income 35,897
Other Comprehensive Loss
Unrealized Gains on Investments for
year ended December 31, 1997(1)
Reclassification Adjustment for Gains
Realized in Net Income(2)
Cumulative Translation Adjustment for
year ended December 31, 1997
Comprehensive Loss for year ended December 31, 1997
Activity under Stock Plans (605,854 shares),
including tax benefits 6 10,300
- - ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 577 471,493 (3,966) 43,620
Comprehensive Income:
Net Income 57,209
Other Comprehensive Loss
Cumulative Translation Adjustment for
year ended December 31, 1998
Comprehensive Income for year ended December 31, 1998
Activity under Stock Plans (1,138,126 shares),
including tax benefits 12 20,872
Treasury Stock Purchased (1,204,325 shares) (29,515)
- - ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1998 $589 $ 492,365 $(33,481) $100,829
====================================================================================================================================
<CAPTION>
Accumulated Other
Comprehensive Income
---------------------------
Unrealized Cumulative Total
(Dollar amounts in thousands) Gains (Losses) Translation Shareholders'
Three Years Ended December 31, 1998 on Investments Adjustment Equity
- - -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, January 1, 1996 $ (2,285) $(26,282) $377,531
Comprehensive Income:
Net Income for period ended October 31, 1996
Other Comprehensive Income
Unrealized Gains on Investments for
period ended October 31, 1996(1) 9,324
Cumulative Translation Adjustment for
period ended October 31, 1996 4,526
Comprehensive Income for period ended October 31, 1996 21,971
Net Transfers from The Dun & Bradstreet Corporation 46,210
Stock Distribution to Holders of Dun &
Bradstreet Stock (57,019,180 shares)
- - -------------------------------------------------------------------------------------------------------------
Balance, November 1, 1996 7,039 (21,756) 445,712
Comprehensive Income:
Net Income for period ended December 31, 1996
Other Comprehensive Income
Unrealized Losses on Investments for
period ended December 31, 1996(1) (956)
Cumulative Translation Adjustment for
period ended December 31, 1996 4,098
Comprehensive Income for period ended December 31, 1996 10,865
Treasury Stock Purchased (266,666 shares) (3,966)
Activity under Stock Plans (105,239 shares),
including tax benefits 1,335
- - -------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 6,083 (17,658) 453,946
Comprehensive Income:
Net Income
Other Comprehensive Loss
Unrealized Gains on Investments for
year ended December 31, 1997(1) 14,647
Reclassification Adjustment for Gains
Realized in Net Income(2) (20,730)
Cumulative Translation Adjustment for
year ended December 31, 1997 (33,962)
Comprehensive Loss for year ended December 31, 1997 (4,148)
Activity under Stock Plans (605,854 shares),
including tax benefits 10,306
- - -------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 (51,620) 460,104
Comprehensive Income:
Net Income
Other Comprehensive Loss
Cumulative Translation Adjustment for
year ended December 31, 1998 (20,634)
Comprehensive Income for year ended December 31, 1998 36,575
Activity under Stock Plans (1,138,126 shares),
including tax benefits 20,884
Treasury Stock Purchased (1,204,325 shares) (29,515)
- - -------------------------------------------------------------------------------------------------------------
Balance, December 31, 1998 $ (72,254) $ 488,048
=============================================================================================================
</TABLE>
(1) Reported net of income tax expense of $4,056 and $3,926 for years ended
December 31, 1996 and December 31, 1997, respectively.
(2) Reported net of income tax benefit of $7,982.
The accompanying notes are an integral part of the consolidated financial
statements.
F-10
<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.
The Balance Sheets, as of December 31, 1998 and 1997, and the Statements of
Income for the years then ended, are presented on a consolidated basis. The
Statement of Income 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).
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 (the "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.
In June 1998, D&B changed its name to R.H. Donnelley Corporation and spun
off a company now named The Dun & Bradstreet Corporation ("New D&B") and
Cognizant changed its name to Nielsen Media Research, Inc. ("NMR") and spun off
a company named IMS Health Incorporated ("IMS Health"). As required by the terms
of the Distribution Agreement, each of New D&B and IMS Health has provided an
undertaking to the Company to be jointly and severally liable with its former
parent company for any liabilities of such former parent company arising out of
the agreements referred to above.
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 the purchase date are considered cash
equivalents. At December 31, 1998 and 1997, 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 20 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 ten 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.
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 based on the fair value of the assets.
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
F-11
<PAGE>
Note 2. Summary of Significant Accounting Policies (Continued)
from remaining years of multi-year contracts, extensions and renewals is
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 specified notice and payments.
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, and nonmonetary accounts are translated using
historical exchange rates. Translation and transaction adjustments recognized in
Other Income (Expense)-Net amounted to losses of $1,207, $502 and $809 for 1998,
1997 and 1996, 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 Allocation 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.
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, revenue
and expenses and the disclosure of contingent assets and liabilities. Actual
results could differ from those estimates.
Earnings Per Share. Net earnings are divided by the weighted average number
of common shares outstanding during the year to calculate basic net earnings per
common share. Diluted net earnings per common share are calculated to give
effect to stock options.
Earnings per share for periods after October 31, 1996 have been computed
based on the average number of ACNielsen shares outstanding. 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, adjusted for the
one-for-three distribution ratio.
New Accounting Pronouncements Adopted in 1998. The Company has adopted
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income," which establishes standards for reporting and display of
comprehensive income and its components in the financial statements. Earlier
periods have been restated to conform with the standards set forth in SFAS No.
130.
In addition, the Company adopted 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. Adoption of
this statement did not result in any change in the Company's reportable
segments.
The Company has adopted SFAS No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits." This statement revises employers'
disclosures about pension and other postretirement benefit plans. It does not
change measurement or recognition provisions for those plans.
New Accounting Pronouncements Not Yet Adopted. In April 1998, the American
Institute of Certified Public Accountants issued Statement of Position (SOP)
98-5, "Reporting on the Costs of Start-Up Activities." The SOP, which the
Company plans to adopt on January 1, 1999, requires that costs of start-up
activities be expensed as incurred. The Company currently capitalizes certain
one-time costs related to introducing new services and conducting business in
new geographic areas. Adoption of this SOP is expected to result in a one-time,
non-cash, after-tax charge of approximately $20,000, which will be recorded as a
cumulative effect of a change in accounting principle-net of tax. However,
adoption of the new accounting policy is not expected to have a material impact
on the Company's future results of operations.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." The statement
establishes accounting and reporting standards requiring that every derivative
instrument (including certain derivative instruments embedded in other
contracts) be recorded in the balance sheet as either an asset or liability
measured at its fair value. The statement requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
allows a derivative's gains and losses to offset related results on the hedged
item in the income statement.
SFAS No. 133 is effective for fiscal years beginning after June 15, 1999.
However, the Company expects to adopt the new statement effective January 1,
1999. SFAS No. 133 cannot be applied retroactively. SFAS No. 133 must be
F-12
<PAGE>
applied to (a) derivative instruments and (b) certain derivative instruments
embedded in hybrid contracts that were issued, acquired, or substantively
modified after December 31, 1997 (and, at the Company's election, before January
1, 1998).
The Company uses foreign exchange forward contracts to hedge significant
known transactional exposures. Based on the Company's derivative positions at
December 31, 1998, management does not anticipate that the adoption of the new
statement will have a material effect on earnings or the financial position of
the Company.
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 to 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 actions commenced in 1998 and will be completed in 1999. Certain
actions were completed at a lower cost than originally estimated while other
actions require higher costs to complete. The following table recaps the
activity by major cost category:
<TABLE>
<CAPTION>
December 31, Asset Cash Revised December 31,
Category 1997 Revaluations Payments Estimates 1998
===============================================================================================================
<S> <C> <C> <C> <C> <C>
Rationalize Product Lines $ 18,300 $ (6,132) $ (8,910) $ (2,845) $ 413
Workforce Reductions 12,400 -- (11,327) 2,030 3,103
Facilities/Real Estate 5,300 (1,130) (4,737) 815 248
- - ---------------------------------------------------------------------------------------------------------------
Total $ 36,000 $ (7,262) $(24,974) $ -- $ 3,764
===============================================================================================================
</TABLE>
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). At December 31, 1998, all
activities have been substantially executed. Accruals remaining totaled $5,240,
at December 31, 1998, primarily for a long-term lease obligation, which will be
paid through 2004.
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 1998, 1997 and 1996, the Company acquired interests in various companies
in separate transactions that were accounted for as purchases. The aggregate
purchase price of such acquisitions in 1998 totaled $131,247, including
contractual obligations and other future costs of $28,594 payable from 1999 to
2001. Payments of $2,795 were made during 1998 for prior year acquisitions. The
largest acquisitions in 1998 were BBI Marketing Services, Inc. ("BASES") and ANR
Amer Nielsen Research Limited ("ANR"). The Company also increased its ownership
in businesses in Australia, Greece, Chile, and India, and acquired a 49%
interest in AMER Research Limited, serving the Middle East and Northern Africa.
BASES, acquired on June 30, 1998, is a provider of simulated test-marketing
services. The initial purchase price was $70,550 including accrued acquisition
costs of $5,272 payable from 1999 to 2001. The purchase price was allocated to
the net assets acquired, resulting in goodwill of $62,642. This goodwill is
being amortized over 40 years on a straight-line basis. The Company may also be
required to make additional cash payments if BASES achieves certain operating
goals. The maximum amount of contingent consideration is approximately $36,000,
payable through 2001.
On September 23, 1998, the Company acquired full ownership in ANR, a
joint-venture business covering Eastern Europe, the former Soviet Union,
sub-Saharan Africa and the Indian subcontinent. The purchase price of $44,030
includes three installment payments due in January 1999, 2000 and 2001 for
$4,912, $9,294 and $8,824, respectively. The installment payments are supported
by a stand-by letter of credit with an international bank. The purchase price
was allocated to the minority interest acquired, with the excess purchase price
of $42,826 recorded as goodwill. This goodwill is being amortized over 40 years
on a straight-line basis. The terms of the agreement provide for additional cash
payments if ANR achieves certain operating goals. Such payments, if earned,
would be paid in 2003 and 2006.
The purchase price allocations for BASES and ANR have been prepared on a
preliminary basis, and changes are expected as integration plans are finalized.
In 1997, the largest acquisition was Entertainment Data Inc., ("EDI"), a
provider of box-office information for the motion-picture industry. The purchase
price of $26,521 included a $4,000 interest-bearing promissory note payable from
1999 to 2001. The purchase price was allocated to the net assets acquired,
resulting in goodwill of $25,846. This goodwill is being amortized over 40 years
on a straight-line basis.
The aggregate purchase price of acquisitions made in 1997 and 1996 totaled
$39,674 and $1,907, respectively.
The results of operations of all purchases are included in the Consolidated
Statements of Income from dates of acquisition. Had the acquisitions made in
1998, 1997 and 1996 been consummated on January 1 of the year preceding the year
of acquisition, the results of these acquired operations would not have had a
significant impact on the Company's consolidated results of operations for any
of the years presented.
F-13
<PAGE>
Note 6. Pension and Other Postretirement Benefits
Defined Benefit Plans
The Company has a defined benefit pension plan covering substantially all
employees in the United States. Generally, the benefits to be paid to employees
under this plan are based on notional account balances that 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.
The Company provides various health-care and life-insurance benefits for
retired United States 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.
At the Distribution Date, the Company assumed responsibility for pension
and postretirement 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 and postretirement plans, covering
substantially all employees in the United States. The benefits to be paid to
employees under the defined benefit pension plan were based on years of credited
service and average final compensation.
Prior to the Distribution Date, the Company accounted for the pension and
postretirement benefit plans in the United States as multi-employer plans.
Accordingly, the Company has recorded pension and postretirement benefit costs
as allocated by D&B totaling $1,301 and $1,432, respectively, for the ten months
ended October 31, 1996.
The components of pension and postretirement costs for the years ending
1998, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
Pension Benefits Other Postretirement Benefits
- - ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996* 1998 1997 1996*
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Service cost on benefits earned during the year $ 10,392 $ 8,766 $ 7,218 $ 354 $ 404 $ 80
Interest cost on projected benefit obligation 16,940 16,596 14,442 406 469 60
Expected return on plan assets (23,853) (22,190) (18,586) -- -- --
Amortization of transition (asset) obligation (2,571) (2,623) (2,231) -- -- --
Amortization of prior-service costs 1,187 1,131 1,134 (120) (120) (20)
Amortization of net loss 392 404 602 -- 77 --
Settlement and curtailment (gain) (18) -- -- -- -- --
- - ------------------------------------------------------------------------------------------------------------------------------------
Net pension and postretirement costs $ 2,469 $ 2,084 $ 2,579 $ 640 $ 830 $ 120
====================================================================================================================================
</TABLE>
* Includes U.S. amounts subsequent to the Distribution Date and Non-U.S.
amounts for the full year.
The prior-service costs are amortized on a straight-line basis over the
average remaining service period of active participants. Gains and losses in
excess of 10% of the greater of the benefit obligation or the market-related
value of assets are amortized over the average remaining service period of
active participants.
F-14
<PAGE>
The following tables provide a reconciliation of the changes in the plans'
benefit obligations and fair value of assets for the years ended December 31,
1998 and 1997:
<TABLE>
<CAPTION>
Pension Benefits Other Postretirement Benefits
- - ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1998 1997
====================================================================================================================================
<S> <C> <C> <C> <C>
Reconciliation of benefit obligation
Obligation at January 1 $ 270,417 $ 261,324 $ 7,229 $ 5,909
Service cost 10,392 8,766 354 404
Interest cost 16,940 16,596 406 469
Participant contributions 1,524 1,461 21 19
Plan amendments 1,874 671 -- --
Actuarial loss (gain) 10,907 9,958 (1,227) 447
Benefit payments (14,555) (11,762) (73) (19)
Curtailments (751) -- -- --
Settlement payments (10,663) -- -- --
Transfers 240 -- -- --
Effect of change in foreign exchange rates (701) (16,597) -- --
- - ------------------------------------------------------------------------------------------------------------------------------------
Obligation at December 31 $ 285,624 $ 270,417 $ 6,710 $ 7,229
====================================================================================================================================
Reconciliation of fair value of plan assets
Fair value of plan assets at January 1 $ 301,038 $ 279,196 $ -- $ --
Actual return on plan assets 44,308 40,104 -- --
Employer contributions 12,361 5,520 52 --
Participant contributions 1,524 1,461 21 19
Benefit payments (14,555) (11,762) (73) (19)
Settlement payments (10,663) -- -- --
Transfers 240 -- -- --
Effect of change in foreign exchange rates (1,400) (13,481) -- --
- - ------------------------------------------------------------------------------------------------------------------------------------
Fair value of plan assets at December 31 $ 332,853 $ 301,038 $ -- $ --
====================================================================================================================================
Funded status
Funded status at December 31 $ 47,229 $ 30,621 $ (6,710) $ (7,229)
Unrecognized transition (asset) obligation (8,952) (12,117) -- --
Unrecognized prior-service cost 7,985 7,385 (20) (140)
Unrecognized (gain) loss (22,734) (11,734) 644 1,871
- - ------------------------------------------------------------------------------------------------------------------------------------
Net amount recognized in the balance sheet $ 23,528 $ 14,155 $ (6,086) $ (5,498)
====================================================================================================================================
</TABLE>
Plan assets are invested in diversified portfolios that consist primarily of
equity and debt securities.
Curtailments and settlement payments occurred primarily due to workforce
reduction actions.
The following table provides the amounts in the balance sheet at December
31, 1998 and 1997:
<TABLE>
<CAPTION>
Pension Benefits Other Postretirement Benefits
- - ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1998 1997
====================================================================================================================================
<S> <C> <C> <C> <C>
Prepaid benefit cost $ 61,844 $ 56,568 $ -- $ --
Accrued benefit liability (38,761) (42,413) (6,086) (5,498)
Intangible asset 445 -- -- --
- - ------------------------------------------------------------------------------------------------------------------------------------
Net amount recognized in the balance sheet $ 23,528 $ 14,155 $ (6,086) $ (5,498)
====================================================================================================================================
</TABLE>
F-15
<PAGE>
Note 6. Pension and Other Postretirement Benefits (Continued)
The aggregate projected benefit obligation, accumulated benefit obligation
and fair value of plan assets for the pension plans with accumulated benefit
obligations in excess of plan assets were $29,930, $21,750 and $0 respectively,
at December 31, 1998 and $34,661, $26,446 and $0, respectively, at December 31,
1997. The Company's plan for postretirement benefits other than pensions has no
plan assets.
The significant weighted-average actuarial assumptions at December 31,
1998, 1997 and 1996 were as follows:
Other Postretirement
Pension Benefits Benefits
- - ------------------------------------------------------- ------------------------
1998 1997 1996 1998 1997 1996
======================================================= ========================
Discount rate 6.09% 6.77% 7.92% 6.75% 7.00% 7.50%
Expected long-term rate of
return on plan assets 7.76% 8.52% 9.32% -- -- --
Rate of increase in future
compensation levels 3.62% 3.95% 4.58% 4.16% 4.16% 4.16%
================================================================================
A 7.5% annual rate of increase in the per capita cost of covered health
care benefits was assumed for 1998. The rate was assumed to decrease gradually
each year to a rate of 5.0% by the year 2004 and remain constant thereafter.
A 1% change in assumed health care cost trend rates would have the
following effects:
1% Increase 1% Decrease
================================================================================
Effect on total service and interest cost components of
net periodic postretirement health care benefit cost $ 84 $ 77
Effect on the health care component of the
accumulated postretirement benefit obligation $783 $701
================================================================================
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 171,352, 221,466
and 18,775 shares, and recognized compensation expense of $4,267, $4,005 and
$639 for the years 1998 and 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. The Company's expense related to this plan was
$3,523 for the ten months ended October 31, 1996. Effective with the
Distribution, the Company established a new savings plan that does not provide
for a matching contribution.
Note 7. Employee Stock and Related Plans
In October 1996, the Company adopted three stock incentive plans which
reserved 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, 5,081,444 shares of common
stock were available for future grants as of December 31, 1998. The plans
adopted in 1996 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.
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, 1998, 2,613,641 LSARs were outstanding, which are exercisable upon
the occurrence of a specified event.
In connection with the acquisition of BASES in June 1998, the Company
adopted a stock incentive plan which reserves 1,000,000 shares of common stock
for issuance to key employees of BASES. The plan requires that shares granted
come from the Company's treasury stock. The BASES options have a term of ten
years and vest in 9.5 years unless certain earnings targets are met during a
thirty-month period ending December 31, 2000. Under this stock incentive plan
adopted in 1998, options for 1,000,000 shares were granted, and no shares of
common stock were available for future grants as of December 31, 1998.
F-16
<PAGE>
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 four 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, the Company's net income
and net earnings per share would have been reduced to the pro forma amounts
indicated below.
1998 1997 1996
===============================================================================
Net Income-as reported $57,209 $35,897 $15,844
Net Income-pro forma $50,137 $23,889 $13,200
Basic earnings per share-as reported $ 1.00 $ .63 $ .28
Basic earnings per share-pro forma $ .88 $ .42 $ .23
Diluted earnings per share-as reported $ .96 $ .62 $ .28
Diluted earnings per share-pro forma $ .84 $ .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 considered 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):
<TABLE>
<CAPTION>
1996
-----------------------
Old ACNielsen &
D&B Replacement
1998 1997 Options Options
=====================================================================================
<S> <C> <C> <C> <C>
Expected dividend yield -- -- 4.7% --
Expected stock price volatility 30% 30% 15% 30%
Risk-free interest rate 4.89% 5.90% 6.15% 6.11%
Expected holding period of options 4.2 years 4.1 years 5.0 years 5.0 years
=====================================================================================
</TABLE>
The weighted-average fair value of options granted during 1998, 1997 and
1996 was $8.25, $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 price
Shares 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
Granted 2,608,400 25.98
Exercised (970,747) 15.65
Canceled or Expired (188,330) 16.86
- - --------------------------------------------------------------------------------
Options outstanding at December 31, 1998 10,194,013 $ 18.97
================================================================================
The following is a summary of shares exercisable, average remaining life
and average option price per share of options outstanding at December 31, 1998:
<TABLE>
<CAPTION>
Shares Outstanding Shares Exercisable
----------------------------------------- -----------------------------
Number of Average option Average Number of Average option
Shares price per share Remaining life Shares price per share
==================================================================================================== =============================
<S> <C> <C> <C> <C> <C>
Converted D&B options 2,455,737 $15.63 5.7 years 2,192,503 $15.48
Effective-date options 4,137,876 15.71 7.9 years 2,794,069 15.72
Options granted subsequent to July, 1997 3,600,400 24.99 9.5 years 243,996 22.38
- - ------------------------------------------------------------------------------------------------------------------------------------
Options outstanding at December 31, 1998 10,194,013 $18.97 7.9 years 5,230,568 $15.93
====================================================================================================================================
</TABLE>
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 1998 and 1997 with respect to this program totaled
$958 and $3,212, respectively. There were no charges to income in 1996 with
respect to this program.
F-17
<PAGE>
Note 8. Income Taxes
Income (loss) before provision for income taxes consisted of:
1998 1997 1996
================================================================================
U.S. $30,742 $56,221 $(35,714)
Non-U.S. 67,874 12,323 66,208
- - --------------------------------------------------------------------------------
$98,616 $68,544 $ 30,494
================================================================================
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:
1998 1997 1996
================================================================================
U.S. Federal and state:
Current $ 4,348 $ 6,790 $ (9,776)
Deferred (2,329) 10,286 (996)
- - --------------------------------------------------------------------------------
Total 2,019 17,076 (10,772)
- - --------------------------------------------------------------------------------
Non-U.S.:
Current 35,974 25,781 10,631
Deferred 3,414 (10,210) 14,791
- - --------------------------------------------------------------------------------
Total 39,388 15,571 25,422
- - --------------------------------------------------------------------------------
Total $ 41,407 $ 32,647 $ 14,650
================================================================================
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:
<TABLE>
<CAPTION>
1998 1997 1996
==========================================================================================
<S> <C> <C> <C>
Tax expense at the U.S. statutory rate $ 34,516 $ 23,990 $ 10,673
State and local income taxes, net of Federal effect 999 1,827 (1,161)
Reduction in the valuation allowance (6,212) (6,313) (656)
Non-U.S. taxes 15,648 8,063 2,249
Other (3,544) 5,080 3,545
- - ------------------------------------------------------------------------------------------
Provision for Income Taxes $ 41,407 $ 32,647 $ 14,650
==========================================================================================
</TABLE>
The Company's deferred tax assets (liabilities) are comprised of the
following at December 31, 1998 and 1997:
1998 1997
===============================================================
Deferred Tax Assets:
Operating Losses $ 53,384 $ 56,093
Special Charges 1,506 12,580
Employee Benefits 13,670 18,222
Other Accruals 17,822 11,140
Bad Debts 3,783 3,151
- - ---------------------------------------------------------------
90,165 101,186
Valuation Allowance (55,057) (73,553)
- - ---------------------------------------------------------------
35,108 27,633
- - ---------------------------------------------------------------
Deferred Tax Liabilities:
Postretirement Benefits (17,664) (17,970)
Intangibles and Deferred Charges (20,483) (10,820)
Fixed Assets (7,509) (5,175)
Other Assets (14,485) (20,634)
- - ---------------------------------------------------------------
(60,141) (54,599)
- - ---------------------------------------------------------------
Net Deferred Tax Liability $ (25,033) $ (26,966)
===============================================================
During the year ended December 31, 1998, the valuation allowance decreased
by $18,496. Approximately $12,300 of the reduction did not effect the provision
for income taxes as the related deferred tax assets were reduced by a like
amount. The remaining reduction was primarily due to changes in economic
circumstances which made the utilization of certain Non-U.S. net operating loss
carryforwards more likely than not.
U.S. operating loss carryforwards of approximately $15,000 will expire in
2012. Non-U.S. loss carryforwards of $52,353 will expire at various times
through 2003. Non-U.S. loss carryforwards of $72,378 have an indefinite life. An
income tax benefit of $1,371 and $602 related to employee stock options was
credited to shareholders' equity in 1998 and 1997, respectively. No provision
was made for U.S. taxes payable on undistributed earnings amounting to
approximately $224,918, $167,400 and $167,000 in 1998, 1997 and 1996,
respectively, as such amounts are permanently reinvested.
Note 9. Short-Term Debt
In April 1998, the Company replaced its existing $125,000 bank credit
facility with a new $250,000 bank credit facility. The new credit facility,
which is provided by a global bank syndicate comprising twelve banks, is
unsecured and has a three-year term. The new credit facility includes
subfacilities for borrowings in foreign currencies and for the issuance of
letters of credit. The base interest rates applicable to borrowings may be fixed
or various floating rates, depending on the type and currency of the borrowing.
Interest spreads and fees are based upon the Company's fixed charge coverage
ratio for the preceding four quarters. The terms of the credit agreement
contain, among other things, limitations on debt of the Company and its
subsidiaries and financial covenants requiring the Company to maintain
compliance with a minimum fixed charge coverage ratio requirement and a maximum
leverage ratio requirement. As of December 31, 1998, the Company was in
compliance with such requirements. At December 31, 1998 and 1997,
F-18
<PAGE>
$24,308 and $23,001, respectively, were drawn against the credit facilities. The
nominal value of the borrowings approximates fair value. There are no
compensating balance requirements or material commitment fees associated with
the credit facility.
In addition, the Company has established unsecured lines of credit with
four banks, totaling $45,000, to meet short-term cash requirements of the
business. These unsecured lines of credit provide loans at floating interest
rates. At December 31, 1998, approximately $16,100 was outstanding under these
arrangements.
The weighted-average interest rates on short-term debt at December 31, 1998
and 1997, respectively, were 2.90% and 0.63%. The Company's short-term
borrowings at December 31, 1998 were in the United States and Japan. At December
31, 1997 the Company's short-term borrowings were in Japan.
Note 10. Financial Instruments with Off-Balance-Sheet Risk
The Company uses foreign exchange forward contracts to hedge significant
known transactional exposures. The Company conducts its business in a wide
variety of foreign currencies. The Company enters into various foreign exchange
forward contracts to manage its exposure against adverse changes in foreign
exchange rates. The notional amounts for foreign exchange forward contracts
represent the U.S. dollar equivalent of an amount exchanged. Foreign currency
forward exchange contracts are designated for established and committed
transactions that are expected to occur in less than one year. Gains or losses
on such contracts were not material to the consolidated financial statements for
the years ended December 31, 1998 and 1997.
The following table represents the gross notional amounts of foreign
exchange forward contracts in U.S. dollars:
December 31,
---------------------
1998 1997
===============================================================
Australian dollars $ 827 $ --
Japanese yen 600 --
German deutsche marks 482 --
French francs 397 1,567
Netherland guilders 149 688
British pounds 125 --
Spanish pesetas 93 646
Italian lire 92 1,577
Other 529 615
- - ---------------------------------------------------------------
Total $3,294 $5,093
===============================================================
In early 1999, the Company entered into additional foreign exchange forward
contracts totaling $33,964 to hedge other known transactional exposures. These
forward contracts mature in monthly installments at various dates during 1999.
The Company does not utilize derivative financial instruments for trading
or other speculative purposes.
Note 11. 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, 1998, 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.
The terms of the Indemnity and Joint Defense Agreement (see Note 14) limit
the Company's ability to make certain payments ("Restricted Payments"),
including payments for dividends and stock repurchases. Pursuant to such
limitation, the aggregate amount of all Restricted Payments made by the Company
cannot exceed the sum of $15,000 and 20% of the Company's cumulative net
earnings, as defined, from November 1, 1996. The Board of Directors has
authorized the Company to repurchase ACNielsen Common Stock up to the amount
permitted by the Indemnity and Joint Defense Agreement. During 1998, the Company
repurchased 1,204,325 shares of its Common Stock for a total of $29,515.
Note 12. 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 totaled $82,600 for the ten months ended October 31, 1996 and are
included in operating costs and selling and administrative expenses in the
Consolidated Statements of Income. 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 for the ten months
ended October 31, 1996.
F-19
<PAGE>
Note 12. Other Transactions with Affiliates (Continued)
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.
The activity in the net transfers from (to) D&B account, included in
Divisional Equity is summarized as follows:
Ten Months Ended
October 31, 1996
===================================================================
D&B services and other charges $ 88,059
Loans and advances-net (379,189)
U.S. income taxes (12,507)
Cash transfers-net 349,847
- - -------------------------------------------------------------------
Net transfers from D&B $ 46,210
===================================================================
Note 13. 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 1998, 1997 and 1996 was $39,361,
$37,021, and $38,427, respectively. The totals include $98 for the ten months
ended October 31, 1996 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 $26,248, $23,141 and $26,570 for 1998,
1997 and 1996, respectively.
At December 31, 1998, 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, is as follows:
Computer &
Other
Years Ended Real Estate Equipment
================================================
1999 $ 37,200 $ 19,818
2000 31,627 13,550
2001 26,395 6,028
2002 16,577 2,508
2003 11,657 1,727
Thereafter 18,570 5,049
- - ------------------------------------------------
$142,026 $ 48,680
================================================
The Company has agreements with third parties, including D&B, for certain
data processing services, extending beyond one year. At December 31, 1998, the
minimum annual services covered by these agreements are approximately as
follows:
Years Ended
================================================
1999 $14,234
2000 11,561
2001 5,152
2002 2,274
2003 1,753
Thereafter --
- - ------------------------------------------------
$34,974
================================================
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 14. 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 The Dun & Bradstreet Corporation ("Old D&B"), A.C. Nielsen Company
which is a subsidiary of the Company ("ACNielsenCo"), and I.M.S. International,
Inc. ("IMS"), formerly a subsidiary of Cognizant Corporation ("Cognizant") and
currently a subsidiary of IMS Health Incorporated (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 $350,000, 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
F-20
<PAGE>
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. Discovery is currently ongoing.
In connection with the IRI Action, Old D&B, Cognizant (the former parent
company of IMS) and the Company entered into an Indemnity and Joint Defense
Agreement (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 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 Old 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.
In June 1998, (i) Old D&B changed its name to R.H. Donnelley Corporation
and spun off (the "D&B Spin") a company now named The Dun & Bradstreet
Corporation ("New D&B"), and (ii) Cognizant changed its name to Nielsen Media
Research, Inc. ("NMR") and spun off (the "Cognizant Spin") a company named IMS
Health Incorporated ("IMS Health"). Pursuant to the terms of a Distribution
Agreement dated as of October 28, 1996 among the Company, Old D&B and Cognizant,
New D&B was required as a condition to the D&B Spin, and IMS Health was required
as a condition to the Cognizant Spin, to undertake to the Company to be jointly
and severally liable with its former parent company for, among other things, the
obligations of such former parent company under the Indemnity and Joint Defense
Agreement. Each of New D&B and IMS Health did provide such undertaking to the
Company.
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 15. Supplemental Financial Data
Accounts Receivable-Net: 1998 1997
===========================================================================
Trade $232,167 $224,038
Less: allowance for doubtful accounts (13,890) (12,114)
Unbilled receivables 30,975 21,089
Other 30,456 27,808
- - ---------------------------------------------------------------------------
$279,708 $260,821
===========================================================================
Other Current Assets: 1998 1997
===========================================================================
Deferred taxes $ 26,449 $ 11,129
Prepaid expenses 30,078 27,294
- - ---------------------------------------------------------------------------
$ 56,527 $ 38,423
===========================================================================
Property, Plant and Equipment-Net: 1998 1997
===========================================================================
Land $ 4,376 $ 4,545
Buildings 48,504 50,216
Computer Hardware and Other Equipment 353,226 363,536
Leasehold Improvements 32,994 30,356
Less: accumulated depreciation and amortization (281,436) (282,993)
- - ---------------------------------------------------------------------------
$157,664 $165,660
===========================================================================
Accounts Payable: 1998 1997
===========================================================================
Trade $ 53,542 $ 47,303
Taxes other than income taxes 29,641 27,727
Other 7,748 11,878
- - ---------------------------------------------------------------------------
$ 90,931 $ 86,908
===========================================================================
Accrued and Other Current Liabilities: 1998 1997
===========================================================================
Salaries, wages, bonuses and
other compensation $ 85,112 $ 66,093
Deferred revenue and advance billings 44,715 44,045
Postemployment benefits 18,665 41,590
Other 159,904 149,794
- - ---------------------------------------------------------------------------
$308,396 $301,522
===========================================================================
F-21
<PAGE>
Note 15. Supplemental Financial Data (Continued)
Intangibles
Intangibles and Other Assets, and Computer
Computer Software and Goodwill: Other Assets Software Goodwill
================================================================================
January 1, 1997 $ 48,610 $ 37,858 $ 204,022
Additions, at cost 11,182 14,774 34,885
Amortization (9,883) (19,037) (10,114)
Increase in deferred income taxes 2,076 -- --
Foreign translation, asset write-offs
and other 3,016 (8,307) (8,310)
- - --------------------------------------------------------------------------------
December 31, 1997 55,001 25,288 220,483
Additions, at cost 21,412 34,620 120,930
Amortization (11,344) (17,913) (10,093)
Increase in deferred income taxes 3,405 -- --
Foreign translation, asset write-offs
and other 1,415 593 (2,994)
================================================================================
December 31, 1998 $ 69,889 $ 42,588 $ 328,326
================================================================================
Accumulated amortization of intangibles and other assets, computer
software, and goodwill was $172,974 and $164,285 at December 31, 1998 and 1997,
respectively.
- - --------------------------------------------------------------------------------
Note 16. Operations by Geographic Segment
The Company, operating globally, delivers market research, information and
analysis to the consumer products and service industries. The Company is
organized into three geographic regions-the Americas; Europe, Middle East and
Africa; and Asia Pacific. A senior executive is responsible for the performance
of each geographic region. The Company evaluates regional performance based on
operating income, prior to special charges and excluding incremental costs of
Year 2000 computer software modifications.
Financial information by geographic area is summarized as follows.
Inter-area sales were not significant.
<TABLE>
<CAPTION>
Operating Operating Depreciation Capital Computer
Revenue Income (Loss)(1) Assets & Amortization Expenditures(2) Software
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
1998
United States $ 390,374 $ 39,041 $ 307,623 $ 26,346 $ 9,675 $ 19,089
Canada/Latin America 188,396 31,797 135,523 9,720 8,231 1,827
- - ------------------------------------------------------------------------------------------------------------------------------------
Total Americas 578,770 70,838 443,146 36,066 17,906 20,916
Europe, Middle East and Africa 589,620 29,158 470,778 32,106 17,618 12,742
Asia Pacific 257,006 7,546 211,693 17,706 19,851 962
- - ------------------------------------------------------------------------------------------------------------------------------------
Total $1,425,396 $ 107,542 $1,125,617 $ 85,878 $ 55,375 $ 34,620
====================================================================================================================================
1997
United States $ 310,037 $ 19,510 $ 278,865 $ 23,095 $ 9,206 $ 12,168
Canada/Latin America 203,978 23,723 144,320 12,526 8,598 216
- - ------------------------------------------------------------------------------------------------------------------------------------
Total Americas 514,015 43,233 423,185 35,621 17,804 12,384
Europe, Middle East and Africa 579,050 21,192 396,087 36,411 18,144 2,275
Asia Pacific 298,522 (3,669) 219,836 20,826 12,479 115
- - ------------------------------------------------------------------------------------------------------------------------------------
Total $1,391,587 $ 60,756 $1,039,108 $ 92,858 $ 48,427 $ 14,774
====================================================================================================================================
1996
United States $ 286,522 $ (4,912) $ 269,397 $ 22,296 $ 10,565 $ 10,598
Canada/Latin America 185,516 22,210 136,656 10,459 15,299 728
- - ------------------------------------------------------------------------------------------------------------------------------------
Total Americas 472,038 17,298 406,053 32,755 25,864 11,326
Europe, Middle East and Africa 597,669 21,828 399,890 37,702 25,442 12,443
Asia Pacific 288,937 (10,971) 230,125 22,717 14,197 681
- - ------------------------------------------------------------------------------------------------------------------------------------
Total $1,358,644 $ 28,155 $1,036,068 $ 93,174 $ 65,503 $ 24,450
====================================================================================================================================
</TABLE>
F-22
<PAGE>
Note 16. Operations by Geographic Segment (Continued)
<TABLE>
<CAPTION>
Reconciliation of Segment Operating Income to Pre-Tax Income: 1998 1997 1996
====================================================================================================================================
<S> <C> <C> <C>
Segment Operating Income $ 107,542 $ 60,756 $ 28,155
- - ------------------------------------------------------------------------------------------------------------------------------------
Special Charge(1) -- (36,000) --
Year 2000 Expenses (15,911) -- --
- - ------------------------------------------------------------------------------------------------------------------------------------
Reported Operating Income 91,631 24,756 28,155
Other Income-Net(3) 6,985 43,788 2,339
- - ------------------------------------------------------------------------------------------------------------------------------------
Pre-Tax Income $ 98,616 $ 68,544 $ 30,494
====================================================================================================================================
</TABLE>
(1) The 1997 special charge of $36,000 ($2,200 in Canada/Latin America, $4,000
in Europe, Middle East and Africa, $29,800 in Asia Pacific) was recorded in
the fourth quarter. (See Note 3 to the Consolidated Financial Statements.)
(2) Capital expenditures relate only to long-lived assets and do not include
additions to intangibles and other assets, and goodwill of $142,342,
$46,067 and $4,402 in 1998, 1997 and 1996, respectively.
(3) 1997 Other Income-Net includes a non-operating gain on sale of investments
of $39,039.
Note 17. Earnings Per Share
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
The following table sets forth the computation of basic and diluted earnings per share: 1998 1997 1996
====================================================================================================================================
<S> <C> <C> <C>
Weighted-average number of Shares Outstanding Basic EPS 57,236 57,139 56,712
Dilutive Effect Of:
Stock Options 2,598 1,230 270
- - ------------------------------------------------------------------------------------------------------------------------------------
Weighted-average number of Shares Outstanding and Common Stock Equivalents Diluted EPS 59,834 58,369 56,982
====================================================================================================================================
Net Income $57,209 $35,897 $15,844
====================================================================================================================================
Basic Earnings Per Share $ 1.00 $ .63 $ .28
====================================================================================================================================
Diluted Earnings Per Share $ .96 $ .62 $ .28
====================================================================================================================================
</TABLE>
All periods prior to November 1, 1996 reflect the adjusted share and option
activity of The Dun & Bradstreet Corporation. Options to purchase 1,309,900
shares of common stock at share prices ranging from $26.19 to $27.75 and
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 years 1998 and 1996, respectively,
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.
Note 18. Quarterly Financial Data (Unaudited)
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
=============================================================
March 31 June 30 September 30 December 31 Year
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
1998
Operating Revenue $ 325,801 $ 346,495 $ 364,665 $ 388,435 $1,425,396
Operating Income $ 204 $ 25,920 $ 28,824 $ 36,683 $ 91,631
Net Income $ 1,799 $ 16,088 $ 17,703 $ 21,619 $ 57,209
Earnings Per Share:
Basic $ .03 $ .28 $ .31 $ .38 $ 1.00
Diluted $ .03 $ .27 $ .30 $ .36 $ .96
Average Number of Shares Outstanding:
Basic 57,359 57,281 57,111 57,197 57,236
Diluted 59,353 59,670 59,013 59,607 59,834
====================================================================================================================================
1997
Operating Revenue $ 324,774 $ 356,325 $ 346,864 $ 363,624 $1,391,587
Operating (Loss) Income $ (9,178) $ 18,657 $ 23,143 $ (7,866)(1) $ 24,756
Net (Loss) Income $ (4,116) $ 10,249 $ 13,731 $ 16,033 (2) $ 35,897
(Loss) Earnings Per Share:
Basic $ (.07) $ .18 $ .24 $ .28 $ .63
Diluted $ (.07) $ .18 $ .23 $ .27 $ .62
Average Number of Shares Outstanding:
Basic 56,919 57,035 57,209 57,388 57,139
Diluted 56,919 57,536 59,540 59,259 58,369
====================================================================================================================================
</TABLE>
(1) Includes a special charge of $36,000 pre-tax ($28,200 after-tax) or $.49
per basic share, $.48 per diluted share.
(2) Includes a non-operating gain on the sale of investments of $39,039
($28,200 after tax), or $.49 per basic share, $.48 per diluted share.
F-23
<PAGE>
ACNIELSEN CORPORATION
SUMMARY FINANCIAL DATA
(Dollar amounts in millions, except per share data)
<TABLE>
<CAPTION>
Years Ended December 31,
========================================================
1998 1997 1996 1995(1) 1994(2)
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Operating Revenue $ 1,425 $ 1,392 $ 1,359 $ 1,281 $ 1,092
Net Income (Loss) $ 57 $ 36 $ 16 $ (231) $ (65)
Actual and Pro Forma Earnings (Loss) Per Share of Common Stock:
Basic(3) $ 1.00 $ .63 $ .28 $ (4.09) $ (1.15)
Diluted(3) $ .96 $ .62 $ .28 $ (4.09) $ (1.15)
Balance Sheet Data:
Total Assets $ 1,126 $ 1,039 $ 1,036 $ 943 $ 958
Long-term Debt $ 23 $ 8 $ 3 $ 6 $ 9
===================================================================================================================================
</TABLE>
(1) Net Income (Loss) 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) Net Income (Loss) includes restructuring expense of $9 million pre-tax in
1994.
(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
EXHIBIT 21
<TABLE>
<CAPTION>
ACNIELSEN CORPORATION
LIST OF ACTIVE SUBSIDIARIES - 1/29/99
- - -----------------------------------------------------------------------------------------------------------------------------------
State or % Ownership
Name Country of 100% Except
Incorporation as Noted
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
A. C. NIELSEN COMPANY Delaware
A. C. Nielsen (Argentina) S.A. Delaware
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. S.A. Belgium
A. C. Nielsen do Brasil Ltda. Brazil
ACNielsen.CBPA Ltda. Brazil
ACNielsen Cayman Islands Ltd. Cayman Islands
SRG Research Canada Ltd. Canada
D.J. Calhoun Marketing & Development Ltd. Canada 86.0
Recherches en Marketing (Quebec) Inc. Canada
ACNielsen Chile Limitada Chile
ACNielsen Chile S.A. Chile 51.0
A. C. Nielsen de Colombia S.A. Colombia
ACNielsen Cyprus Limited Cyprus
Amer Nielsen Research Belarus
ANR Amer Nielsen Research Limited d.o.o. Croatia
ANR Amer Nielsen Eesti OU Estonia
ANR Amer Nielsen Research Ltd. Kazakhstan
ACNielsen Kenya Limited Kenya
UAB ANR Amer Nielsen Research Baltica Lithuania
ANR Amer Nielsen Research SRL Moldova
ANR Amer Nielsen Research Limited Nigeria
ZAO Amer Nielsen Marketing Company Ltd. Russia
ZAO Amer Nielsen Plus Russia
ANR Amer Nielsen Research Slovakia s.r.o. Slovakia
ANR Amer Nielsen Research raziskovalna druzba, d.o.o. Slovenia
ANR Amer Nielsen Research Ltd. Uganda
ANR Amer Nielsen Research UKRAINE JSC Ukraine
ANR Amer Nielsen Research, D.O.O. Yugoslavia
ACNielsen AIM A/S Denmark
<PAGE>
A. C. NIELSEN COMPANY (Continued)
Teollisuuden Tielopalvelu Industrial Intelligence Ltd. Oy Finland
A. C. Nielsen Finland Oy Finland
Finnpanel Oy Finland 50.0
A. C. Nielsen S.A. France
ACNielsen EDI, S.A.R.L. France
ERIM S.A. France
Panel de Gestion S.A.R.L. France
ACNielsen S.A. Greece
A. C. Nielsen (Dublin) Limited Ireland
A. C. Nielsen of Ireland Limited Ireland
A. C. Nielsen Italia S.p.A. Italy
ACNielsen CRA S.r.l. Italy
Telepanel S.A. Italy
ACNielsen SITA S.r.l. Italy 80.0
ACNielsen Japan K.K. Japan
A. C. Nielsen, S.A. de C.V. Mexico
A. C. Nielsen (Nederland) B.V. The Netherlands
ANR Amer Nielsen Research CZ, s.r.o. Czech Republic
ACNielsen (Polen) B.V. The Netherlands
ANR Amer Nielsen Research Sp. z.o.o. Poland
ACNielsen South Africa B.V. The Netherlands
ACNielsen South Africa Holdings B.V. The Netherlands
Market Research Africa (Proprietary) Limited South Africa 65.0
Centrum Voor Marketing Analyses B.V. The Netherlands 70.0
ACNielsen ZET Arastirma Hizmetleri A.S. Turkey 85.0
Neslein Holding (Canada) C.V. The Netherlands
ACNielsen Holding (Canada) B.V. The Netherlands
ACNielsen Canada Holding Company Canada
ACNielsen Company of Canada Canada
ACNielsen Canada Partnership Canada
ACNielsen (Korea) Limited Korea
<PAGE>
A. C. NIELSEN COMPANY (Continued)
Neslein Holding (Spain) C.V. The Netherlands
ASEE Nielsen Holding (Spain) Srl Spain
N&P Holding Spain S.L. Spain
A. C. Nielsen Company S.L. Spain
Infoadex S.A. Spain 50.0
Panel Internacional S.L. Spain
Menesta Investments B.V. Netherlands
Neslein Holding (Portugal) SGPS, Lda. Portugal
A.C. Nielsen Portugal - Estudos de Mercado Lda. Portugal
ACNielsen (NZ) Ltd. New Zealand
ACNielsen Research (NZ) Limited New Zealand
ACNielsen Media Measurement Services (NZ) Ltd. New Zealand 75.0
ACNielsen Research Services (NZ) Ltd. New Zealand
ACNielsen Norge AS Norway 98.9
ACNielsen Reklame-Statistikk AS Norway 85.6
ACNielsen de Puerto Rico, Inc. Puerto Rico
ACNielsen (Singapore) Pte. Ltd. Singapore
ACNielsen AB Sweden
A. C. Nielsen S.A. Switzerland
Media Focus Switzerland 50.0
A. C. Nielsen Management Services S.A. Switzerland
ACN/PIB Partners Connecticut 50.01
ART Holding, L.L.C. Delaware
Nielsen Holdings, Inc. Delaware
Nielsen Leasing Corporation Delaware
Panel International S.A. Delaware
A. C. NIELSEN COMPANY LIMITED England
ACNIELSEN EDI, INC. California
ACNielsen EDI S.L. Spain
<PAGE>
ACNIELSEN EDI II, INC. California
ACNIELSEN EDI 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
ACNIELSEN HOLDINGS LIMITED Hong Kong
ACNielsen Management Services Limited Hong Kong
ACNielsen (Asia Pacific) Limited Hong Kong
ACNielsen (Taiwan) Limited Taiwan
ACNielsen (China) Ltd. Hong Kong
Shanghai ACNielsen Ltd. China 80.0
ACNielsen Group Limited Hong Kong
ACNielsen (Guangzhou) Limited China 92.0
ACNielsen International Research (Hong Kong) Limited Hong Kong
ACNielsen Holdings Pte. Ltd. Singapore
P.T. ACNielsen Indonesia Indonesia
ACNielsen Customized Japan K.K. Japan
Hankook Research Co., Ltd. Korea 50.0
ACNielsen (Malaysia) Sdn. Bhd. Malaysia
ACNielsen Marketing Promotions (Malaysia) Sdn. Bhd. Malaysia
ACNielsen Consumer Research Services (Phils.), Inc. Philippines
ACNielsen Dealer Measurement Services (Phils.), Inc. Philippines
ACNielsen Media Measurement Services (Phils.), Inc. Philippines
ACNielsen Monitoring Services (Philippines) Inc. Philippines
ACNielsen Unisearch (Philippines) Inc. Philippines
ACNielsen Research (Singapore) Pte. Ltd. Singapore
ACNielsen (Thailand) Limited Thailand
ACNielsen (Vietnam) Limited Vietnam
<PAGE>
ACNIELSEN INTERNATIONAL RESEARCH (UNITED STATES) LIMITED New York
ACNIELSEN (ISRAEL) LTD. Israel 90.0
ACNIELSEN MARKETING RESEARCH INDIA PRIVATE LIMITED India
ACNielsen Research Services Private Limited India
TAM Media Research Private Limited India 50.0
BBI MARKETING SERVICES, INC. Delaware
BBI Operations, LLC Kentucky
BBIO, Inc. Kentucky
CZT/ACN TRADEMARKS, L.L.C. Delaware 50.0
NESLEIN HOLDING, L.L.C. Delaware
NESLEIN HOLDING (AUSTRALIA) C.V. The Netherlands
ACNielsen (Holdings) Pty. Limited Australia
ACNielsen Australia Pty. Limited Australia
AGB McNair Holdings Pty. Limited Australia
Surveys Australia Research Pty. Limited Australia
Tart Research Pty. Limited Australia
ACNielsen Research Pty. Limited Australia
McNair Anderson Associates Pty. Limited Australia
ACNielsen Advanced Analytics Pty. Limited Australia
Australian Independent Media Data Pty. Limited Australia
</TABLE>
<PAGE>
Exhibit 23
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 Form S-8 (File Nos. 333-14085, 333-14753 and 333-58885) of our
report dated February 1, 1999 incorporated by reference in ACNielsen
Corporation's Form 10-K for the year ended December 31, 1998 and to all
references to our Firm included in this Form 10-K.
/s/ARTHUR ANDERSEN LLP
Stamford, Connecticut
March 10, 1999
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, 1998 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 shall expire on March 31, 2000.
This Power of Attorney has been signed by the following persons in the
capacities indicated on February 18, 1999.
Name Title
/s/NICHOLAS L. TRIVISONNO Chairman, Chief Executive Officer
___________________________________ And Director
Nicholas L. Trivisonno
___________________________________ Executive Vice President and Chief
Robert J. Chrenc Financial Officer
___________________________________ Senior Vice President and Controller
Michael S. Geltzeiler
/s/ROBERT H. BEEBY Director
___________________________________
Robert H. Beeby
/s/MICHAEL P. CONNORS Director
___________________________________
Michael P. Connors
<PAGE>
/s/DONALD W. GRIFFIN Director
___________________________________
Donald W. Griffin
/s/THOMAS C. HAYS Director
___________________________________
Thomas C. Hays
/s/KAREN L. HENDRICKS Director
___________________________________
Karen L. Hendricks
/s/ROBERT M. HENDRICKSON Director
___________________________________
Robert M. Hendrickson
/s/ROBERT HOLLAND, JR. Director
___________________________________
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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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 100,533
<SECURITIES> 0
<RECEIVABLES> 279,708
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<EPS-DILUTED> .96
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