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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
Securities Exchange Act of 1934
For the fiscal year ended December 31, 1999
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, Connecticut 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:
Name of each exchange
Title of each class 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 31, 2000, 57,816,150 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 31, 2000) was approximately
$1,181 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 1999 Fiscal Year.
Part III: Portions of Registrant's Proxy Statement dated
March 10, 2000.
The Index to Exhibits is located on Pages 17 to 19.
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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, certain businesses acquired since the Distribution,
including ACNielsen BASES and ACNielsen EDI, and new ventures formed since the
Distribution, principally ACNielsen eRatings.com.
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 and entertainment information 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 1999, nearly 69% 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 and Entertainment Services and Consumer
Panel Services.
ACNielsen also offers its clients, 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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1999 1998 1997
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Retail Measurement $ 1,034 $ 999 $ 987
Customized Research 263 213 191
Media and Entertainment * 114 110 120
Consumer Panel 114 103 94
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Total $1,525 $1,425 $1,392
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* Reported revenue for Media and Entertainment 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, 1999 was approximately 21,000. Of this number, approximately 3,248 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.
On February 18, 2000, the Company announced Operation Leading Edge, a
plan to accelerate the Company's growth beyond 2000 through a series of
business-building initiatives designed to accelerate both revenue and profit
growth by enhancing products and services, addressing changing client needs,
improving efficiency and reducing the Company's cost structure. Additional
information regarding Operation Leading Edge is contained in "Management's
Discussion and Analysis of Financial Condition and Results of Operations" which
is incorporated by reference into this Form 10-K in response to Part II, Item 7.
Retail Measurement Services
Through its Retail Measurement Services the Company delivers data to
clients on product movement and related causal information (i.e., 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.
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 clients 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
clients.
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.
Levels of Information
ACNielsen provides information and insight to clients from a macro to a
micro level. Whether on a country, market or individual retailer level,
ACNielsen generally 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 group of stores as well as within a retail trading area.
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ACNielsen's account-specific information provides sales and marketing
managers with a comprehensive array of retailer-specific sales and merchandising
information, producing reports of product and category performance that
encompass an organization's own brands as well as competing brands.
On a global basis, ACNielsen sells and provides to its multi-national
clients 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 uses its rich data sources to extract business insights that
are used by clients to create competitive advantage. ACNielsen's decision
support software offers a robust environment for data access, manipulation,
analysis and final presentation through fast access to ACNielsen as well as
clients' internal data. This decision support software can also uncover
"exceptional" information through sophisticated analytical modeling
capabilities. ACNielsen information can be delivered on-line and via other
electronic media (CD-ROM, diskette), as well as through the Internet and printed
reports.
ACNielsen INF*ACT Workstation software is ACNielsen's flagship software
offering. The Workstation is an open, Windows-based, analytical and applications
development tool set used worldwide by ACNielsen clients. ACNielsen's SalesNet
provides fast, easy access to pre-run analyses delivered via the Internet.
ACNielsen also offers a robust, proprietary and ad-hoc reporting tool called
Workstation Plus which allows users to access, query and build advanced reports
for INF*ACT and/or relational databases.
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, NITE, and others.
In addition, ACNielsen offers sophisticated category management tools
such as Business Manager, 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,
ACNielsen VANTIS, a business unit of ACNielsen BASES, focuses on researching new
business initiatives for marketers outside fast moving consumer goods
categories. 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, Toronto and Singapore to carry out customized research in Asia Pacific,
Western Europe, North and South America, the Middle East and Africa.
Media and Entertainment Services
Media
The information produced by ACNielsen Media International 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
clients.
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ACNielsen Media International'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 17 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 Media International's advertising expenditure measurement
services, which are marketed in 31 countries, provide to clients, 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.
Media Monitoring Services Ltd. was acquired on November 30, 1999 and
is a provider of advertising measurement services in
the United Kingdom, Australia, and Asia.
Entertainment
In late 1997, ACNielsen acquired Entertainment Data, Inc. ("ACNielsen
EDI"), a provider of information for the motion picture industry. Based in
Hollywood, California, ACNielsen EDI provides box-office information to studios
and exhibitors in the motion picture industry. This information helps users
decide where and for how long a movie will play, as well as the allocation of
advertising and promotional dollars. ACNielsen EDI also provides creative and
consumer research to the studios. ACNielsen EDI provides services in the U.S.,
Canada, U.K., Germany, Spain, France, Austria, Ireland, Mexico, Argentina and
Australia.
Internet
In September 1999, ACNielsen and NetRatings, Inc. ("NetRatings")
entered into a venture to establish ACNielsen eRatings.com ("eRatings.com").
ACNielsen has an 80.1% ownership interest in the venture with NetRatings owning
the remainder. eRatings.com is primarily engaged in providing Internet
measurement services. The venture, either directly or through joint ventures, is
expected to operate in all major geographic regions worldwide other than the
United States and Canada and it plans to roll out the service initially in five
countries by the end of the first quarter of 2000.
ACNielsen's proprietary sampling methodology is used to form a
representative panel. Once an individual or household agrees to become a
panelist, software is installed on the panelist's PC. The software tracks
individuals' Internet usage on a real time basis. Aggregate information and data
are then made available on a weekly and monthly basis through a website.
The software requires virtually no panelist intervention once installed
and can be automatically upgraded. The software collects and delivers Internet
usage data using NetRatings' proprietary collection software. This allows
panelists to freely access the Internet without having to worry about data
collection.
Once the software is installed, it collects real-time data by tracking
user activity including the sites visited, duration of visits and the duration
and frequency of sessions. The technology is also able to track advertising
activity including the actual ad banners viewed, advertisers, sites the ads ran
on, and ads clicked on. The software tracks user profiles, including the age,
gender, marital status, education, occupation, income and ethnicity of the panel
member.
eRatings.com's Internet Measurement Service will be marketed under the
Nielsen//NetRatings brand and will provide clients with the ability to
accurately track and analyze Internet audience behavior, in addition to in-depth
research reports across a variety of Internet related subjects.
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eRatings.com has exclusive rights to market the Nielsen//NetRatings
Internet Measurement Service in countries outside the United States, Canada and
Japan. In France the Nielsen//NetRatings service will be offered via a company
called Mediametrie eRatings.com, which is a venture among Mediametrie, the
French audience measurement and survey company, NetRatings and eRatings.com. In
March 2000, eRatings.com formed a joint venture with IBOPE Media Information
called IBOPE eRatings.com that will launch the Nielsen//NetRatings service in
Latin America. Also, in March 2000, eRatings.com acquired an ownership interest
in the Japanese venture previously established by NetRatings to provide the
Nielsen//NetRatings service in Japan.
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 55,000 demographically balanced U.S. households that use hand-held
scanners to record every bar-coded item purchased and, outside the United
States, is comprised of more than 80,000 households in 19 countries.
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. Clients can choose from a wide variety of applications or
analyses, from syndicated to customized and basic to complex. ACNielsen offers a
full suite of syndicated category management applications. These reports give
manufacturers and retailers insights into cross outlet shopping, consumer
loyalty and the value of consumer segments such as the value of core versus
occasional shoppers.
ACNielsen also provides delivery tools that allow marketers to process,
chart and analyze ACNielsen Consumer Panel information quickly and easily. Among
these are CD-ROM tools and Panel*Fact for Windows, which enable managers to
create customized reports to meet their individual analytic needs and to share
data and analyses with various members within an organization.
Relationship Among ACNielsen, D&B and Cognizant after the Distribution
Prior to the Distribution, D&B, Cognizant and ACNielsen entered into
certain agreements (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. In July 1999, IMS Health distributed shares
of Gartner Group, Inc. ("Gartner") class B stock to its shareholders. In
connection with such distribution and pursuant to the Distribution Agreement
referred to below, Gartner provided an undertaking to the Company to be jointly
and severally liable for any liabilities of Cognizant (now NMR) 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 to
Cognizant, (ii) the ACNielsen Business to ACNielsen and (iii) all other
liabilities to D&B.
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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").
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.
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 and Entertainment Services, significant competitors include
Taylor Nelson Sofres, GfK, AGB Media Services, and Video Research (Japan) and,
with respect to Internet Measurement Services, Media Metrix, NetValue, IMR
Worldwide and PC Data.
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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,
timeliness, reliability and comprehensiveness of analytical services and data,
flexibility in tailoring services to client needs, price, and geographic and
market coverage.
Non-U.S. Operations
As indicated above, ACNielsen engages in a significant portion of its
business outside of the United States, with nearly 69% of its revenues in 1999
being generated through non-U.S. sources. ACNielsen's non-U.S. 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.
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," "designed," "intend,"
"could," "should," "planned," "estimated," "potential," "target," "aim,"
"objective" 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
Euro plans on a timely basis; (vi) the likely incurrence of significant losses
by ACNielsen eRatings.com while its business is being developed, the difficulty
of forecasting its future revenues and costs and uncertainties associated with
the international development of an Internet ratings service; (vii) the
Company's ability to successfully implement Operation Leading Edge (its
announced plan to enhance its products and services, address changing clients
needs, improve efficiency and reduce its cost structure) and to achieve the
estimated levels of revenue and profit growth therefrom; (viii) the impact of
foreign currency fluctuations since so much of the Company's earnings are
generated abroad; (ix) the degree of acceptance of new product introductions;
(x) 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.
7
<PAGE>
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 Segments
The response to item 101(d) of Regulation S-K is incorporated herein by
reference to Note 15 Operations by Geographic Segment on Pages 53-54 of the 1999
Annual Report. Additionally, long-lived assets totaled $266,014, $260,842 and
$151,269 in the U.S. and $412,061, $391,118 and $367,334 (in thousands of U.S.
dollars) in the Non-U.S. in 1999, 1998 and 1997, respectively.
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.
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. ("IMS"), formerly a
subsidiary of Cognizant Corporation ("Cognizant") and a predecessor of IMS
Health Incorporated (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 clients; (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 clients
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.
8
<PAGE>
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.
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,
2000 and brief summaries of their business experience during the past five
years.
<TABLE>
<CAPTION>
Name Title Age
------ --------- -------
<S> <C> <C>
Nicholas L. Trivisonno Chairman and Chief Executive Officer* 52
Michael P. Connors Vice Chairman* 44
Robert J. Chrenc Executive Vice President and Chief Financial Officer 55
Earl H. Doppelt Executive Vice President and General Counsel 46
*Member of the Board of Directors.
</TABLE>
9
<PAGE>
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. Connors was elected Vice Chairman of ACNielsen, effective May 1996;
he served as Senior Vice President of D&B (business information), effective
April 1995 through November 1, 1996. Prior thereto, he had served as Senior Vice
President of American Express Travel Related Services (travel and financial
services), effective September 1989 through March 1995.
Mr. 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.
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.
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 34 and 36 of the 1999 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 1995 through 1999 set
forth in "Summary Financial Data" on Page 56 of the 1999 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 32 to 36 of the 1999 Annual Report, which information is incorporated
herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company uses foreign-currency forward-exchange contracts to hedge
forecasted intercompany transactions and forecasted purchases of data services
from a third party provider. The Company enters into foreign-currency
forward-exchange contracts with durations of less than twelve months. The
Company adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," on January 1, 1999. The cumulative effect of adoption was not
material to the consolidated financial statements. Gains or losses on such
contracts were not material to the consolidated financial statements for the
years ended December 31, 1999 and 1998. 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 foreign-currency forward-exchange contracts
outstanding at December 31, 1999 (in thousands of U.S. dollars):
Average Foreign-
Notional Fair Currency Forward-
Amounts Value Exchange Rates
---------- ------- ------------------
Euro $ 5,923 $ 99 .9755
Japanese yen 660 (24) 102.7958
Australian dollars 109 (1) 1.5793
Other 154 16
---------------------- --------- --------
Total $ 6,846 $ 90
---------------------- --------- --------
10
<PAGE>
At December 31, 1999, the Company had outstanding fixed-rate short-term
debt of $95,139 (in thousands of U.S. dollars) borrowed under its credit
facilities. The weighted-average interest rate of this debt at December 31, 1999
was 3.32%.
The Company had intercompany loans of $2,319 and $3,367 (in thousands
of U.S. dollars) denominated in U.S. dollars and Canadian dollars, respectively,
on a Colombian Peso functional currency balance sheet at December 31, 1999 which
were paid in January 2000.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Financial Statements and Schedule under Item 14 on Page 14.
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 "Proposals To Be Voted On; Proposal No.
1-Election of Directors" in the Company's proxy statement dated March 10, 2000
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 sections entitled "Board Structure and Compensation" and
"Compensation of Executive Officers" in the Company's proxy statement dated
March 10, 2000 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 "Common Stock Ownership of Management and
Certain Beneficial Owners" in the Company's proxy statement dated March 10, 2000
filed with the Securities and Exchange Commission.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
11
<PAGE>
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 14.
(2) Financial Statement Schedule.
See Index to Financial Statements and Schedule
on Page 14.
(3) Other Financial Information.
Summary Financial Data. See Index to Financial
Statements and Schedule on Page 14.
(4) Exhibits.
See Index to Exhibits on Pages 17 to 19, which
indicates which Exhibits are management contracts or
compensatory plans required to be filed as Exhibits.
Only responsive information appearing on Pages 32
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.
12
<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 27, 2000
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 /s/KAREN L. HENDRICKS*
- - -------------------------------------- -----------------------------------
Nicholas L. Trivisonno (Karen L. Hendricks, Director)
(Chairman, Chief Executive Officer
and Director)
(Principal Executive Officer)
/s/ROBERT J. CHRENC /s/ROBERT M. HENDRICKSON*
- - -------------------------------------- -----------------------------------
Robert J. Chrenc (Robert M. Hendrickson, Director)
(Executive Vice President and Chief
Financial Officer)
(Principal Financial and Accounting Officer)
/s/MICHAEL S. GELTZEILER /s/ROBERT HOLLAND, JR.*
- - -------------------------------------- -----------------------------------
Michael S. Geltzeiler (Robert Holland, Jr., Director)
(Senior Vice President and Controller)
/s/ROBERT H. BEEBY* /s/JOHN R. MEYER*
- - -------------------------------------- -----------------------------------
(Robert H. Beeby, Director) (John R. Meyer, Director)
/s/MICHAEL P. CONNORS* /s/BRIAN B. PEMBERTON*
- - -------------------------------------- -----------------------------------
(Michael P. Connors, Director) (Brian B. Pemberton, Director)
/s/DONALD W. GRIFFIN* /s/ROBERT N. THURSTON*
- - -------------------------------------- -----------------------------------
(Donald W. Griffin, Director) (Robert N. Thurston, Director)
/s/THOMAS C. HAYS*
- - --------------------------------------
(Thomas C. Hays, Director)
*By: /s/ Ellenore O'Hanrahan
--------------------------------------------------
(Ellenore O'Hanrahan, attorney-in-fact)
Date: March 27, 2000
13
<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, 1999 appearing on Pages 37 to 56 of
the 1999 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 1999 Annual
Report
---------- ------------
Report of Independent Public Accountants F-6 37
Statement of Management Responsibility
for Financial Statements F-6 37
As of December 31, 1999 and 1998:
Consolidated Balance Sheets F-8 39
For the years ended December 31, 1999, 1998 and 1997:
Consolidated Statements of Income F-7 38
Consolidated Statements of Cash Flows F-9 40
Consolidated Statements of Shareholders' Equity F-10 41
Notes to Consolidated Financial Statements F-11 42
Quarterly Financial Data (Unaudited) for the years
ended December 31, 1999 and 1998 F-23 55
Management's Discussion and Analysis of Financial
Condition and Results of Operations F-1 32
Other financial information:
Five-year selected financial data F-24 56
SCHEDULE:
Report of Independent Public Accountants 15 --
ACNielsen Corporation and Subsidiaries:
II-Valuation and Qualifying Accounts for the
years ended December 31, 1999, 1998 and 1997 16 --
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.
14
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of ACNielsen Corporation:
We have audited in accordance with generally accepted auditing
standards, the 1999, 1998 and 1997 consolidated financial statements included in
ACNielsen Corporation's 1999 Annual Report incorporated by reference in this
Form 10-K, and have issued our report thereon dated February 17, 2000. Our audit
was made for the purpose of forming an opinion on those statements taken as a
whole. The 1999, 1998 and 1997 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 17, 2000
15
<PAGE>
<TABLE>
ACNIELSEN CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
for the years ended December 31, 1999, 1998, 1997
(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
----------- ------------ --------------- -----------
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
<S> <C> <C> <C> <C>
For the Year Ended December 31, 1999 $ 13,890 $ 843 $ 4,405 (b) $ 10,328
======== ======== ======= ========
For the Year Ended December 31, 1998 $ 12,114 $ 4,140 (b) $ 2,364 $ 13,890
======== ======== ======= ========
For the Year Ended December 31, 1997 $ 10,847 $ 2,330 $ 1,063 $ 12,114
======== ======== ======= ========
<FN>
NOTE: (a) Represents primarily the charge-off of uncollectible accounts for
which a reserve was provided.
(b) During 1998, an unusually large reserve was provided due to the
difficult economic climate in Asia Pacific and the Emerging
Markets. Deductions in 1999 reflect the resolution of the accounts
for which a reserve was provided in 1998.
</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, 1999
Postemployment Benefits/Workforce Reductions $ 3,103 $ 0 $ 3,103 $ 0
Contractual Obligations 5,240 0 1,843 3,397(d)
Rationalize Product Lines 413 0 413 0
Facilities/Real Estate 248 0 248 0
--------- ------- --------- ----------
$ 9,004 $ 0 $ 5,607 $ 3,397
========= ======= ========= ==========
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
========= ========== ========= ==========
<FN>
NOTE: (c) Includes non-cash charges of $6,132 to rationalize product lines and $1,130 for consolidation of facilities.
(d) Represents a long-term lease obligation that will be paid through 2003.
</FN>
</TABLE>
16
<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 *
28, 1996 among The Dun & Bradstreet
Corporation, Cognizant Corporation and
ACNielsen Corporation (incorporated herein
by reference to Exhibit 10(a) to the 1996
Form 10-K).
(b) Tax Allocation Agreement dated as of *
October 28, 1996 among The Dun & Bradstreet
Bradstreet Corporation, Cognizant Corporation
and ACNielsen Corporation (incorporated
herein by reference to Exhibit 10(b) to the
1996 Form 10-K).
(c) Employee Benefits Agreement dated as of *
October 28, 1996 among The Dun & Bradstreet
Corporation, Cognizant Corporation and
ACNielsen Corporation (incorporated herein
by reference to Exhibit 10(c) to the 1996
Form 10-K).
(d) Intellectual Property Agreement dated as of *
October 28, 1996 among The Dun & Bradstreet
Corporation, Cognizant Corporation and
ACNielsen Corporation (incorporated herein
by reference to Exhibit 10(d) to the 1996
Form 10-K).
+This exhibit constitutes a management contract, compensatory plan, or
arrangement.
*Incorporated herein by reference to a previously filed document.
17
<PAGE>
Exhibit Number
Regulation S-K Description
- - ------------------ -------------
(e) TAM Master Agreement dated as of October *
28, 1996 between Cognizant Corporation
and ACNielsen Corporation (incorporated
herein by reference to Exhibit 10(e) to the
1996 Form 10-K).
(f) Indemnity and Joint Defense Agreement dated *
as of October 28, 1996 among The Dun &
Bradstreet Corporation, Cognizant
Corporation and ACNielsen Corporation
(incorporated herein by reference to
Exhibit 10(f) to the 1996 Form 10-K).
(g) 1996 ACNielsen Corporation Non-Employee +*
Directors' Stock Incentive Plan
(incorporated herein by reference to
Exhibit 10(g) to the 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 (filed herewith).
(r) Form of LSAR Agreement (incorporated herein +*
by reference to Exhibit 10(r) to the
1996 Form 10-K).
+This exhibit constitutes a management contract, compensatory plan, or
arrangement.
*Incorporated herein by reference to a previously filed document.
18
<PAGE>
Exhibit Number
Regulation S-K Description
- - ------------------ -------------
(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
(incorporated herein by reference to
Exhibit 10(t) to the 1998 Form 10-K).
(u) ACNielsen Corporation Deferred Compensation +*
Plan (incorporated herein by reference to
Exhibit 4.1 to the Company's Form S-8 filed
on February 25, 2000, Commission File No.
333-31152).
(v) Letter Agreement dated December 16, 1999 +
between ACNielsen Corporation and Robert J
Lievense (filed herewith).
13 Annual Report to Security Holders (filed herewith).
1999 Annual Report (pages 32 to 56)
Only responsive information appearing on
Pages 32 to 56 to Exhibit 13 is
incorporated herein by reference, and no
other information appearing in Exhibit 13
is or shall be deemed to be filed as part
of this Form 10-K.
21 Subsidiaries of the Registrant (filed herewith).
List of Active Subsidiaries as of January 31, 2000
23 Consents of Experts and Counsel (filed herewith).
Consent of Arthur Andersen LLP
24 Power of Attorney (filed herewith).
Powers of Attorney dated February 17, 2000
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).
(c) Letter of Undertaking dated July 16, 1999
from Gartner Group, Inc. to R.H. Donnelley
Corporation and ACNielsen Corporation
(filed herewith).
+This exhibit constitutes a management contract, compensatory plan, or
arrangement.
*Incorporated herein by reference to a previously filed document.
19
<PAGE>
Exhibit 10(q)
NONQUALIFIED STOCK OPTION AGREEMENT
UNDER THE
1996 ACNIELSEN CORPORATION
KEY EMPLOYEES' STOCK INCENTIVE PLAN
This nonqualified stock option agreement (the "Award Agreement") confirms the
nonqualified stock option award (the "Award") made as of December 15, 1999, by
the Compensation Committee (the "Committee") of the Board of Directors of
ACNielsen Corporation (the "Company") under the 1996 ACNielsen Corporation Key
Employees' Stock Incentive Plan (the "Plan") to
_____________ (the "Participant")
of nonqualified stock options ("Options") to purchase the number of shares of
the Company's common stock, par value $0.01 per share, 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
--------- ---------- ----------- ------------
$23.125 12/15/01 12/15/09
$23.125 12/15/02 12/15/09
$23.125 12/15/03 12/15/09
<PAGE>
An additional tranche of Options (the "Performance Options") is granted hereby
as follows:
Price Vesting Number of Expiration
Per Share Date Shares Date
----------- --------- ----------- ------------
23.125 6/15/09 12/15/09
In the event that, at any time prior to June 15, 2009, the "Fair Market Value"
(as defined in the Plan) of the Company's common stock attains $32.75 (the
"Target Price") and such Fair Market Value maintains (or exceeds) such price for
five consecutive trading days (the "Required Period"), the Performance Options
will become exercisable as follows:
Number of Shares Performance Vesting Date
------------------ --------------------------
12/15/01
12/15/02
12/15/03
In the event the Target Price is attained for the Required Period at any time
following a Performance Vesting Date, the Performance Options which would have
vested on such Performance Vesting Date had the Target Price been attained for
the Required Period prior thereto will become immediately exercisable.
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.
Notwithstanding anything to the contrary in this Award Agreement, upon the
occurrence of a "Change in Control" (as such term is defined in the
change-in-control agreement entered into by the Participant and the Company),
then all unvested Options will become immediately exercisable.
Notwithstanding anything to the contrary in this Award Agreement, upon the
termination of the Participant's employment from the Company without "Cause" (as
such term is defined in The ACNielsen Corporation Executive Transition Plan),
then all unvested Options will (i) become immediately exercisable, (ii) remain
exercisable for a two-year period and (iii) terminate thereafter.
<PAGE>
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 Committee, 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______________________
Michael P. Connors
Vice Chairman
The undersigned hereby accepts and agrees to all the terms and provisions of the
foregoing Award Agreement and acknowledges receipt of (i) a copy of the Plan and
its related prospectus and (ii) a copy of the 1998 Annual Report.
- - ------------- ---------------------
Date Participant
Exhibit 10(v)
December 16, 1999
Robert J Lievense
President and Chief Operating Officer
ACNielsen Corporation
177 Broad Street
Stamford, CT 06901
Dear Bob:
I would like to confirm the terms of your retirement:
o Promptly following the December 16 Board meeting, we will announce
your decision to retire effective at the end of next year. You
will relinquish your titles and Board seat effective December 31,
1999 but remain employed by ACNielsen in a senior advisory
capacity during 2000.
o You will not receive additional option grants. Your WAIP bonus for
1999, to be paid in February 2000, will be no less than 100% of
target.
o For 2000 you will be paid a salary of $510,000; a bonus of
$450,000; and a 1999-2000 incentive award in accordance with the
terms of the current two-year incentive program.
o At the end of 2000, you will retire from the Corporation with
11-1/2 years of service. Accordingly, your SERP benefit will be
based on 53% of your "Average Final Compensation". You will also
be entitled to retiree medical and dental coverage in accordance
with the terms of our health plan.
o In accordance with ACNielsen's option plans, you will, in general,
have five years from your date of retirement to exercise your
stock options. Please note, however, that no options may be
exercised after their ten-year expiration date.
o For the first quarter of 2000, William Deam will continue to
report to you. Yiannis Papadopoulos, Emerging Markets, and Jane
Perrin, Global Information Systems, will report to you for the
entire year.
<PAGE>
2
o For 2001, you will serve as a consultant to the Corporation. You
will be paid a fee of $960,000 (in installments). You will also be
entitled to specified benefits (including financial counseling,
club dues, and annual physical). Your consultancy agreement will
contain mutually agreeable customary terms and conditions. The
agreement will also provide that in the event of your death during
the consultancy, any remaining fees will be payable to your
estate.
o We will reimburse you for your relocation back to the United
States. In addition, we will ensure that you are not
tax-disadvantaged by reason of your stay in Europe while employed
by us.
If the foregoing is agreeable to you, please sign and return one copy
to me.
Sincerely,
/s/ Earl H. Doppelt
EHD:dgh
Agreed to and Approved
/s/ Robert J Lievense
- - ---------------------
Robert J Lievense
Date: 12/16/99
EXHIBIT 13
ACNielsen Corporation
Management's Discussion and Analysis
of Financial Condition and Results of Operations
(Dollar amounts in thousands, except per share data)
Year-ended December 31, 1999
Compared with Year-ended December 31, 1998
ACNielsen Corporation ("ACNielsen" or "the Company") reported net income of
$56,967 or $.95 per diluted share in 1999, which included a $20,173 or $.34 per
diluted share charge, reflecting the cumulative effect of a change in accounting
for costs of start-up activities. (See Note 2 to the Consolidated Financial
Statements.) Net income also includes an after-tax expense of $7,247 or $.12 per
share for Year 2000 system modification costs and a negative after-tax impact of
$4,951 or $.08 per share from foreign currency translation.
Income before the cumulative effect of change in accounting principle was
$77,140, an increase of 34.8% over $57,209 reported in 1998. Diluted earnings
per share before the cumulative effect of a change in accounting was $1.29, up
34.4% from $0.96 in 1998.
Revenue increased 7.0% in 1999 to $1,525,375 from $1,425,396 in 1998,
reflecting local currency growth of 9.3% and a negative $32,354 impact from
translating foreign currencies to the U.S. dollar. Total Americas revenue
increased 13.8% to $658,811 from $578,770, after a negative $24,462 impact from
foreign currency translation, primarily the result of devalued currencies in
Latin America. In the United States revenue grew 22.5%, reflecting continued
strong growth in account-level and consumer panel services and the
year-over-year impact of the ACNielsen BASES and Market Decisions acquisitions.
Revenue for the Europe, Middle East & Africa ("EMEA") region was $594,509, up
slightly as compared to $589,620 in 1998, reflecting the negative impact of
foreign currency translation. In local currency, the region achieved a 4.1% gain
in revenue. Asia Pacific's revenue increased 5.9%, to $272,055 from $257,006,
reflecting positive foreign currency translation impact and modest growth in the
underlying businesses. Asia Pacific's local currency revenue increased 1.3%.
ACNielsen reported operating income of $121,786 reflecting a 32.9%
improvement over $91,631 in the prior year after absorbing a negative $8,251
impact from foreign currency translation and $1,092 of start-up costs for the
ACNielsen eRatings.com business. In local currency, operating income improved
41.9% as the result of profitable revenue growth and improved operating
efficiencies.
The Company reported operating costs of $758,559 in 1999, an 8.3% increase
from $700,740 in 1998. Expense growth resulted from higher staffing in the U.S.
to support the higher revenue base, EMEA's investment in enhancing scanning
coverage and consumer panels, the impact of expensing start-up costs in 1999
versus amortization of deferred start-up costs in prior years, and the
consolidated expenses from acquired companies, partially offset by the impact of
the strong U.S. dollar.
Selling and administrative expenses of $549,816 increased 3.5% from
$531,236 reported in 1998, reflecting the impact of expenses from acquisitions
partially offset by favorable currency translation.
ACNielsen reported other income-net of $6,780 compared with other
income-net of $6,985 in 1998. This decrease results from higher interest expense
on higher borrowings partially offset by increased gains on foreign exchange.
The following discusses results on a geographic basis.
Total Americas revenue increased 13.8% in 1999 to $658,811 from $578,770 in
1998. Excluding the negative impact of currency translation of $24,462, revenue
grew 18.1%, reflecting solid growth in the U.S. and the acquisition of ACNielsen
BASES and Market Decisions. Operating income for the Americas region increased
19.8% to $84,879 from $70,838 including $6,732 of negative foreign currency
translation impact primarily from the weakening of Latin America currencies. In
local currency, Americas operating income grew 29.3%. Revenue in the United
States climbed 22.5% to $478,146 driven by continued growth in account-level and
consumer panel services, revenue from new clients and new products, and the
acquisition impact of ACNielsen BASES (acquired in June 1998) and Market
Decisions (acquired in June 1999). Excluding the impact of these acquisitions,
U.S. revenue growth was 10.2%. In the United States, operating income increased
44.4%, to $56,364 from $39,041, driven by strong revenue growth in higher-margin
services and income from acquisitions. Excluding the results of acquisitions,
operating income for the United States increased 39.6%. In Canada and Latin
America, revenue declined 4.1% to $180,665 from $188,396, due to a $24,466
negative impact from foreign currency translation. Local currency revenue was up
8.9% on higher retail measurement sales in Canada, Mexico and Brazil. Canada and
Latin America operating income decreased 10.3% to $28,515 from $31,797 due to
negative foreign currency impacts in Latin America. Local currency operating
income advanced 10.9% on profitable growth of Canada and Mexico retail
measurement services, partially offset by the absence of customized research
studies for the Mexican government that occurred in 1998.
EMEA's revenue of $594,509 was up slightly as compared with $589,620 in
1998, after absorbing a negative $19,572 foreign currency translation impact
caused primarily by the weakness of the Euro. In local currency, EMEA revenue
increased 4.1%, driven by solid revenue growth in the United Kingdom, France,
the Nordic countries, South Africa, and Turkey. During 1999, EMEA made overall
improvements in quality, speed and service, and expanded both its account-level
and consumer panel services. Operating income grew 4.6% to $30,511, including a
negative $3,415 impact from foreign currency translation. Local currency
operating income increased 16.4% benefiting from continued operational and cost
efficiencies.
Asia Pacific's revenue increased 5.9% to $272,055 from $257,006 in 1998 due
to strengthening of local currencies, growth in North and Southeast Asia and
higher revenue overall in retail measurement, consumer panel and proprietary
customized research products offset by a decline in non-proprietary customized
research due to recessionary pressures. Local currency revenue grew a modest
1.3%. Operating income grew to an all time high of $19,566 from $7,546 in the
prior year led by increases in North and Southeast Asia and Japan, a shift to a
more profitable revenue mix, and a favorable impact from foreign currency
translation. Local currency operating income increased 136.4%, before a
favorable impact of $1,730 from foreign currency translation.
32
<PAGE>
Year-ended December 31, 1998 Compared with Year-ended December 31, 1997
ACNielsen 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 was $.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
EMEA region increased 1.8%, to $589,620 from $579,050, reflecting a negative
$20,326 impact from 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
included $15,911 of incremental Year 2000 costs.
The Company reported operating costs of $700,740 in 1998, a 2.9% 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 $531,236 increased 3.0% 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 5.5%.
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 Latin America media 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 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 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; and 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.
Income Taxes - The Company's income tax provision was $51,426, $41,407, and
$32,647 in 1999, 1998, and 1997, 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 40.0%, 42.0%, and 45.2% in 1999, 1998 and
1997, respectively. The decrease in the effective tax rate reflected the impact
of global tax planning strategies.
33
<PAGE>
ACNielsen Corporation
Management's Discussion and Analysis
of Financial Condition and Results of Operations
(Dollar amounts in thousands, except per share data)
New Accounting Pronouncements Adopted in 1999 - The Company has adopted
Statement of Position ("SOP") 98-5, "Reporting on the Costs of Start-Up
Activities," which requires that costs of start-up activities be expensed as
incurred. Adoption of this SOP resulted in one-time, non-cash, after-tax charge
of $20,173, which was recorded as a cumulative effect of a change in accounting
principle-net of tax. However, the adoption of the SOP did not have a material
impact on the Company's 1999 results of operations.
In addition, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging
Activities." SFAS No. 133 requires 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. The adoption
of SFAS No. 133 did not have a material effect on earnings or the financial
position of the Company.
Non-U.S. Operating and Monetary Assets - ACNielsen operates globally.
Nearly 69% and 73% of ACNielsen's revenue was generated from non-U.S. operations
during 1999 and 1998, respectively. During 1999, EMEA and Asia Pacific
operations contributed 39% and 18% of reported Company revenue, respectively,
while revenue from countries in Latin America comprised less than 8% 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 the U.S. dollar operating results in the future. In
1999 and 1998, foreign currency translation decreased U.S. dollar revenue growth
by approximately 2.3% and 6.5%, respectively. Operating income growth in 1999
and 1998 was reduced by approximately $8,000 and $14,000, respectively.
ACNielsen has entered into foreign exchange forward contracts to hedge against
significant known transactional exposures.
Non-U.S. monetary assets are maintained in currencies other than the U.S.
dollar, principally in the United Kingdom, Brazil, Spain, New Zealand and Italy.
Changes in the value of these currencies relative to the U.S. dollar are charged
or credited to the accumulated other comprehensive income section of
shareholders' equity. In 1999, 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. The effect of exchange rate changes decreased the U.S. dollar
amount of cash and cash equivalents by $6,324 in 1999 and $5,393 in 1998.
Liquidity and Capital Resources - At December 31, 1999, cash and cash
equivalents totaled $135,199, an increase of $34,666 from December 31, 1998, and
short-term debt totaled $109,164, an increase of $60,132 from December 31, 1998.
The net increase in short-term debt over cash of $25,466 at December 31, 1999
reflects $51,041 paid for the acquisition of businesses, $14,608 paid for
treasury stock repurchases, $5,607 paid relating to special charges and $7,336
paid for postemployment benefits partially offset by cash generated from
operations. The Company plans to incur approximately $160,000 in cash
expenditures for Operation Leading Edge over three years with an estimated
$65,000, $65,000 and $30,000 disbursed in 2000, 2001 and 2002, respectively. Net
cash outlays will be about $60,000, after about $100,000 in anticipated savings
over 2000 through 2002. (See Note 17 to the Consolidated Financial Statements.)
ACNielsen also expects cash outlays in 2000 of $25,489 for prior acquisitions
and $50,000 during 2000 and 2001 to roll out the ACNielsen eRatings.com service.
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 $147,003, $123,859 and
$93,870 in 1999, 1998 and 1997, respectively. The increase in cash provided by
operating activities in 1999 reflected increased cash income ($17,189), and a
reduction in payments related to special charges ($23,696) partially offset by
increased accounts receivable ($15,609) reflecting revenue growth and increased
client advance billings.
Net cash used in investing activities totaled $154,066 for 1999 compared
with $223,052 and $56,071 in 1998 and 1997, respectively. The decrease in cash
usage in 1999 of $68,986 reflected lower cash paid for business acquisitions
($54,407) and the absence of deferred start-up costs in 1999 offset by increased
capital expenditures ($3,208) and software expenditures ($6,242).
Capital expenditures totaled $58,583, $55,375 and $48,427 in 1999, 1998 and
1997, respectively. The increase in capital expenditures in 1999 reflects
consolidated expenditures from acquired companies and the expansion of consumer
panel and television audience measurement (TAM) services. The 1998 increase in
capital expenditures reflects the relocation of several facilities in Asia
Pacific and the expansion of TAM and consumer panel services.
Additions to computer software totaled $40,862, $34,620 and $14,774 in
1999, 1998 and 1997, respectively. The increase in software spending in 1999
reflects the development of new production platforms and costs to acquire Year
2000 compliant software in advance of the normal replacement schedule. The 1998
increase in software spending reflects the development of certain global systems
and software expenditures advanced by Year 2000 issues.
Net cash provided by (used in) financing activities totaled $48,053,
($607), and ($3,892) in 1999, 1998 and 1997, respectively. The increase in cash
provided of $48,660 primarily reflected the increase in short-term borrowings
($35,330) and a decrease in treasury stock repurchases ($14,907).
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 (AEM) services 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
34
<PAGE>
ACNielsen Corporation
Management's Discussion and Analysis
of Financial Condition and Results of Operations
(Dollar amounts in thousands, except per share data)
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 committed line of credit sufficient to meet ACNielsen's
short-term cash requirements. (See Note 9 to the Consolidated Financial
Statements.) Management believes that the combination of cash flows from
operations and bank credit lines, as well as existing cash and cash equivalents,
are sufficient to support the Company's long-term cash requirements.
Business Building Initiatives - Operation Leading Edge
On February 17, 2000, the Board of Directors approved Operation Leading
Edge, the Company's plan to accelerate its growth beyond 2000, through a series
of business-building initiatives. The initiatives, which will span three years,
are designed to accelerate both revenue and profit growth by enhancing products
and services, addressing changing client needs, improving efficiency, and
reducing the Company's cost structure.
The plan will result in a series of pre-tax charges, spread over three
years, totaling approximately $180,000. Management estimates that $70,000 will
be recorded in 2000, $80,000 in 2001, and the balance in 2002. Approximately
$160,000 of the charges will require cash expenditures. Net cash outlays will be
about $60,000, after about $100,000 in anticipated savings over the three-year
period. It is expected that the total workforce will be reduced by approximately
5% or 1,300 positions, primarily in the EMEA region. The reductions are expected
to come from a combination of attrition and severance.
Operation Leading Edge has two elements:
o Creating new capabilities by improving the flexibility of the Company's
information processing and content delivery systems, including leveraging
the capabilities of the Internet. The improved systems will enable the
Company to deliver harmonized information across borders, and more easily
combine information from a variety of sources, speeding the development of
products that deliver higher value and greater insights to clients. This
element is estimated to represent about 75% of the cost of Operation
Leading Edge.
o Streamlining back-office and administrative functions and rationalizing
facilities. This element represents the remaining cost of the plan.
There were no charges to income with respect to this program in 1999.
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 have arisen at many stages in the
Company's supply, processing, distribution and financial chains.
The Company's State of Readiness - Over the last two years the Company
implemented 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. Implementation of the Year 2000 readiness
program was completed and the Company believes that all of its material
Technology Systems were made Year 2000 compliant. It also believes that its Year
2000 readiness program significantly reduced the adverse effects of the Year
2000 issue for the Company. Based on its experience during January 2000, the
Company believes that Year 2000 issues have not adversely affected its ability
to conduct business in the ordinary course.
Costs - Incremental Year 2000 compliance costs, primarily for maintenance
and system modifications, were $12,078 for 1999. The Company believes that it
has adequately accrued, at December 31, 1999, the incremental costs for
remediation efforts it must perform in 2000. Costs to acquire new software and
computer systems in advance of their normal replacement schedules totaled
$12,703 over 1998 and 1999. The Company does not separately track internal costs
that are not related to incremental Year 2000 activities. Such costs are
principally for payroll.
The following table sets forth expenditures by category for the periods
indicated:
<TABLE>
<CAPTION>
Year Ended Year Ended Total Through
December 31, 1998 December 31, 1999 December 31, 1999
- - ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Incremental Y2K Expense $15,911 $12,078 $27,989
Capital expenditures for software and systems $ 5,407 $ 7,296 $12,703
</TABLE>
Euro
The introduction of a common currency across eleven European countries, the
"Euro," is expected to have a significant
35
<PAGE>
ACNielsen Corporation
Management's Discussion and Analysis
of Financial Condition and Results of Operations
(Dollar amounts in thousands, except per share data)
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 is
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 are
substantially complete. 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
levels of readiness and their requirements over the transitional period and
beyond. These communications will be ongoing as the phase-in period progresses.
Current 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 herein are forward looking. These may be
identified by the use of forward-looking words or phrases, such as "anticipate,"
"believe," "expect," "designed," "intend," "could," "should," "planned,"
"estimated," "potential," "target," "aim," "objective" 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
Euro plans on a timely basis; (vi) the likely incurrence of significant losses
by ACNielsen eRatings.com while its business is being developed, the difficulty
of forecasting its future revenues and costs and uncertainties associated with
the international development of an Internet ratings service; (vii) the
Company's ability to successfully implement Operation Leading Edge (its
announced plan to enhance its products and services, address changing client
needs, improve efficiency and reduce its cost structure) and to achieve the
estimated levels of revenue and profit growth therefrom; (viii) the impact of
foreign currency fluctuations since so much of the Company's earnings are
generated abroad; (ix) the degree of acceptance of new product introductions;
(x) the uncertainties of litigation, including the IRI Action; as well as other
risks and uncertainties detailed from time to time in the Company's Securities
and Exchange Commission filings.
Developments in any of 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 13 to the
Consolidated Financial Statements.) In addition, the bank credit agreement
prohibits the Company from paying cash dividends. ACNielsen has not paid cash
dividends since the Distribution and currently does not anticipate paying cash
dividends in the near future. Future dividend decisions will be based on, and
affected by, a number of factors, including the operating results and financial
requirements of ACNielsen, as well as restrictions under 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, 1999
and December 31, 1998, 48,818,800 and 34,481,200 shares were traded,
respectively. The number of shareholders of record at January 31, 2000 and
January 29, 1999 were 5,510 and 6,244, respectively. The following summarizes
the high and low prices per share as reported in the periods shown:
1999 1998
High Low High Low
- - --------------------------------------------------------------------------------
First Quarter $ 28 7/8 $ 22 3/16 $ 26 7/16 $ 20 1/2
Second Quarter $ 31 9/16 $ 26 5/8 $ 29 1/16 $ 24 7/16
Third Quarter $ 32 3/4 $ 21 5/8 $ 28 1/8 $ 19 11/16
Fourth Quarter $ 25 1/2 $ 19 7/8 $ 28 15/16 $ 20 7/16
36
<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, 1999 and 1998, and the related Consolidated Statements of Income,
Cash Flows and Shareholders' Equity for each of the three years in the period
ended December 31, 1999. 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, 1999 and 1998, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1999, in
conformity with generally accepted accounting principles.
As discussed in Note 2 to the accompanying financial statements, in 1999
the Company changed its accounting for start-up costs in accordance with
Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities."
/s/Arthur Andersen LLP
Stamford, Connecticut
February 17, 2000
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 for 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 that 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 /s/Robert J. Chrenc
Chairman and Chief Executive Officer Executive Vice President and Chief
Financial Officer
37
<PAGE>
ACNielsen Corporation
Consolidated Statements of Income
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------
(Amounts in thousands, except per share data) 1999 1998 1997
====================================================================================================================
<S> <C> <C> <C>
Operating Revenue $ 1,525,375 $1,425,396 $1,391,587
Costs and Expenses:
Operating Costs 758,559 700,740 722,035
Selling and Administrative Expenses 549,816 531,236 515,938
Depreciation and Amortization 83,136 85,878 92,858
Year 2000 Expenses 12,078 15,911 --
Special Charge -- -- 36,000
- - --------------------------------------------------------------------------------------------------------------------
Total Costs and Expenses 1,403,589 1,333,765 1,366,831
- - --------------------------------------------------------------------------------------------------------------------
Operating Income 121,786 91,631 24,756
- - --------------------------------------------------------------------------------------------------------------------
Interest Income 7,064 9,695 8,431
Interest Expense (3,608) (1,935) (3,180)
Gain on Sale of Investments -- -- 39,039
Other Income (Expense)-Net 3,324 (775) (502)
- - --------------------------------------------------------------------------------------------------------------------
Other Income-Net 6,780 6,985 43,788
- - --------------------------------------------------------------------------------------------------------------------
Income Before Income Tax Provision and Cumulative
Effect of Change in Accounting Principle 128,566 98,616 68,544
Income Tax Provision 51,426 41,407 32,647
- - --------------------------------------------------------------------------------------------------------------------
Income Before Cumulative Effect of
Change in Accounting Principle 77,140 57,209 35,897
Cumulative Effect to January 1, 1999, of Change in Accounting
for Costs of Start-Up Activities, Net of Income Tax Benefits
of $10,330 (20,173) -- --
- - --------------------------------------------------------------------------------------------------------------------
Net Income $ 56,967 $ 57,209 $ 35,897
- - --------------------------------------------------------------------------------------------------------------------
Basic Earnings per Share:
Income Before Cumulative Effect of Change in Accounting $ 1.33 $ 1.00 $ .63
Cumulative Effect of Change in Accounting (.35) -- --
- - --------------------------------------------------------------------------------------------------------------------
Net Income $ .99 $ 1.00 $ .63
--------------------------------------------------------------------------------------------------------------------
Diluted Earnings per Share:
Income Before Cumulative Effect of Change in Accounting $ 1.29 $ .96 $ .62
Cumulative Effect of Change in Accounting (.34) -- --
- - --------------------------------------------------------------------------------------------------------------------
Net Income $ .95 $ .96 $ .62
- - --------------------------------------------------------------------------------------------------------------------
Weighted-Average Number of Shares Outstanding:
Basic 57,806 57,236 57,139
Diluted 59,999 59,834 58,369
====================================================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
38
<PAGE>
ACNielsen Corporation
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31,
----------------------------
(Dollar amounts in thousands) 1999 1998
===================================================================================================================
<S> <C> <C>
Assets
Current Assets
Cash and Cash Equivalents $ 135,199 $ 100,533
Accounts Receivable-Net 294,266 279,708
Other Current Assets 62,041 56,527
- - -------------------------------------------------------------------------------------------------------------------
Total Current Assets 491,506 436,768
- - -------------------------------------------------------------------------------------------------------------------
Notes Receivable and Other Investments 35,812 28,230
- - -------------------------------------------------------------------------------------------------------------------
Property, Plant and Equipment-Net 159,100 157,664
- - -------------------------------------------------------------------------------------------------------------------
Other Assets-Net
Prepaid Pension 70,744 62,152
Computer Software 64,310 42,588
Intangibles and Other Assets 53,050 69,889
Goodwill 353,364 328,326
- - -------------------------------------------------------------------------------------------------------------------
Total Other Assets-Net 541,468 502,955
- - -------------------------------------------------------------------------------------------------------------------
Total Assets $ 1,227,886 $ 1,125,617
- - -------------------------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current Liabilities
Accounts Payable $ 83,099 $ 90,931
Short-Term Debt 109,164 49,032
Accrued and Other Current Liabilities 300,017 304,596
Accrued Income Taxes 74,306 48,901
- - -------------------------------------------------------------------------------------------------------------------
Total Current Liabilities 566,586 493,460
- - -------------------------------------------------------------------------------------------------------------------
Postretirement and Postemployment Benefits 53,369 44,388
Deferred Income Taxes 58,571 55,486
Other Liabilities 27,524 44,235
- - -------------------------------------------------------------------------------------------------------------------
Total Liabilities 706,050 637,569
- - -------------------------------------------------------------------------------------------------------------------
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-59,859,882 and 58,868,399 shares for 1999 and 1998, respectively 599 589
Series Common Stock-par value $.01 per share, authorized-5,000,000 shares;
issued-none -- --
Additional Paid-In Capital 512,475 492,365
Retained Earnings 157,796 100,829
Treasury Stock, at cost, 2,064,591 and 1,470,991 shares for 1999 and 1998,
respectively (48,089) (33,481)
Accumulated Other Comprehensive Income:
Cumulative Translation Adjustment (101,202) (72,254)
Unrealized Gains on Investments, Net 166 --
Fair Market Value of Forward Exchange Contracts 91 --
- - -------------------------------------------------------------------------------------------------------------------
Total Shareholders' Equity 521,836 488,048
- - -------------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $ 1,227,886 $ 1,125,617
===================================================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
39
<PAGE>
ACNielsen Corporation
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------
(Dollar amounts in thousands) 1999 1998 1997
===================================================================================================================================
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 56,967 $ 57,209 $ 35,897
Reconciliation of Net Income to Net Cash
Provided by Operating Activities:
Cumulative Effect of Change in Accounting Principle:
Costs of Start-Up Activities 20,173 -- --
Depreciation and Amortization 83,136 85,878 92,858
Deferred Income Taxes (111) 3,214 7,062
Special Charge -- -- 36,000
Payments Related to Special Charge (5,607) (29,303) (33,400)
Postemployment Benefit Expense 4,943 7,542 227
Postemployment Benefit Payments (7,336) (17,517) (15,495)
Net Increase in Accounts Receivable (21,971) (6,362) (10,609)
Gain on Sale of Investments -- -- (39,039)
Net Decrease in Other Working Capital Items 14,217 31,690 28,249
Other 2,592 (8,492) (7,880)
- - -----------------------------------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 147,003 123,859 93,870
- - -----------------------------------------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities:
Proceeds from Sale of Investments -- -- 45,899
Payments for Acquisition of Businesses and Other Investments
(excluding cash and cash equivalents acquired of $1,887 in 1999,
$1,127 in 1998 and $2,270 in 1997) (51,041) (105,448) (30,184)
Capital Expenditures (58,583) (55,375) (48,427)
Additions to Computer Software (40,862) (34,620) (14,774)
Other (3,580) (27,609) (8,585)
- - -----------------------------------------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities (154,066) (223,052) (56,071)
- - -----------------------------------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities:
Increase (Decrease) in Short-Term Borrowings 49,180 13,850 (9,718)
Treasury Stock Purchases (14,608) (29,515) --
Proceeds from the Sale of Common Stock under Option Plans 12,699 15,128 5,700
Other 782 (70) 126
- - -----------------------------------------------------------------------------------------------------------------------------------
Net Cash Provided by (Used in) Financing Activities 48,053 (607) (3,892)
- - -----------------------------------------------------------------------------------------------------------------------------------
Effect of Exchange Rate Changes
on Cash and Cash Equivalents (6,324) (5,393) (13,186)
- - -----------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Cash and Cash Equivalents 34,666 (105,193) 20,721
Cash and Cash Equivalents, Beginning of Year 100,533 205,726 185,005
- - -----------------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents, End of Year $ 135,199 $ 100,533 $ 205,726
- - -----------------------------------------------------------------------------------------------------------------------------------
Supplemental Disclosure of Cash Flow Information:
Cash Paid During the Year for Interest $ 2,660 $ 1,526 $ 3,014
Cash Paid During the Year for Income Taxes $ 34,448 $ 32,731 $ 42,101
- - -----------------------------------------------------------------------------------------------------------------------------------
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.
40
<PAGE>
ACNielsen Corporation
Consolidated Statements of Shareholders' Equity
<TABLE>
<CAPTION>
Accumulated Other Comprehensive
Income
---------------------------------
Fair Cumula-
Market tive
Value of Trans- Total
Additional Treasury Unrealized Forward lation Share-
(Dollar amounts in thousands) Common Paid-In Stock, Retained Gains (Losses) Exchange Adjust- holders'
Three Years Ended December 31, 1999 Stock Capital at Cost Earnings on Investments Contracts ment Equity
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1997 $571 $461,193 $(3,966) $ 7,723 $6,083 $(17,658) $453,946
Comprehensive Income:
Net Income 35,897
Other Comprehensive Loss
Unrealized Gains on Investments(1) 14,647
Reclassification Adjustment for
Gains Realized in
Net Income(2) (20,730)
Cumulative Translation Adjustment (33,962)
Comprehensive Loss (4,148)
Activity under Stock Plans
(605,854 shares), including
tax benefits 6 10,300 10,306
- - -----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 577 471,493 (3,966) 43,620 (51,620) 460,104
Comprehensive Income:
Net Income 57,209
Other Comprehensive Loss
Cumulative Translation Adjustment (20,634)
Comprehensive Income 36,575
Activity under Stock Plans
(1,138,126 shares),
including tax benefits 12 20,872 20,884
Treasury Stock Purchased
(1,204,325 shares) (29,515) (29,515)
- - -----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1998 589 492,365 (33,481) 100,829 (72,254) 488,048
Comprehensive Income:
Net Income 56,967
Other Comprehensive Loss
Unrealized Gains on Investments(1) 166
Fair Market Value of Forward
Exchange Contracts $91
Cumulative Translation Adjustment (28,948)
Comprehensive Income 28,276
Activity under Stock Plans (991,483 shares),
including tax benefits 10 20,110 20,120
Treasury Stock Purchased (593,600 shares) (14,608) (14,608)
- - -----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1999 $599 $512,475 $(48,089) $157,796 $ 166 $91 $(101,202) $521,836
===================================================================================================================================
</TABLE>
(1) Reported net of income tax expense of $3,926 and $55 for years ended
December 31, 1997, and December 31, 1999, respectively.
(2) Reported net of income tax benefit of $7,982.
The accompanying notes are an integral part of the consolidated financial
statements.
41
<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 comprised the Company at November 1, 1996, and
substantially all of the assets and liabilities of such businesses.
Note 2. Summary of Significant Accounting Policies
Principles of Consolidation. The consolidated financial statements include
all majority-owned subsidiaries over which ACNielsen exercises control.
Investments over which the Company has significant influence but which it does
not control 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, 1999 and 1998, 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 use. Costs incurred prior to establishment of
technological feasibility of a computer software product are expensed in the
periods in which they are incurred. In addition, computer software includes
amounts purchased or developed 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.
Intangibles and Other Assets. Intangibles and other assets include customer
lists and consumer panel database development. Intangibles are amortized, using
principally the straight-line method, over five to 20 years.
Goodwill and Other Long-Lived Assets. 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.
Goodwill, other 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.
The recognition and measurement of goodwill impairment is assessed at the
business unit level.
Revenue Recognition. Retail Measurement Service products generally have
contract terms of one to three years. The base contract revenue from the first
commitment period is recognized ratably over the initial contract term. Revenue
from remaining years of multi-year contracts, extensions and renewals 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 & 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. The Company has significant operations
outside the United States. Therefore, changes in the value of foreign currencies
affect the Company's financial statements when translated into U.S. dollars.
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-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-Net amounted
to gains (losses) of $2,300, ($1,207) and ($502) for 1999, 1998 and 1997,
respectively.
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.
42
<PAGE>
Note 2. Summary of Significant Accounting Policies (Continued)
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.
New Accounting Pronouncements Adopted in 1999. The Company adopted
Statement of Position ("SOP") 98-5, "Reporting on the Costs of Start-Up
Activities," which requires that costs of start-up activities be expensed as
incurred. Adoption of this SOP resulted in a one-time, non-cash, after-tax
charge of $20,173, which was recorded as a cumulative effect of a change in
accounting principle-net of tax. However, the adoption of the SOP did not have a
material impact on the Company's 1999 results of operations.
In addition, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging
Activities." SFAS No. 133 requires 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. The adoption
of SFAS No. 133 did not 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 were completed in 1999. Certain actions
were completed at a lower cost than originally estimated, while other actions
required higher costs to complete. The following table recaps the activity by
major cost category:
<TABLE>
<CAPTION>
Beginning Asset Cash Revised Ending
Balance Revaluations Payments Estimates Balance
- - ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
For the Year Ended December 31, 1998
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
For the Year Ended December 31, 1999
Rationalize Product Lines $ 413 $ -- $ (480) $ 67 $ --
Workforce Reductions 3,103 -- (3,092) (11) --
Facilities/Real Estate 248 -- (192) (56) --
- - ---------------------------------------------------------------------------------------------------------------------
Total $ 3,764 $ -- $ (3,764) $ -- $ --
=====================================================================================================================
</TABLE>
In the fourth quarter of 1995, the Company recorded a special charge of
$152,170. At December 31, 1999, all activities have been substantially executed.
Accruals remaining totaled $3,397 at December 31, 1999, for a long-term lease
obligation, which will be paid through 2003.
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 provided 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 and Other Investments
On September 22, 1999, the Company announced the formation of a venture to
launch a global service for tracking audiences, advertising and user activity on
the Internet. The Company has an 80.1% ownership interest in the venture, with
NetRatings, Inc. ("NetRatings"), owning the remainder. The venture, known as
ACNielsen eRatings.com, is expected to operate in all major geographic regions
worldwide other than the United States and Canada, and it plans to roll out the
service initially in five countries by the end of the first quarter of 2000.
ACNielsen plans to spend approximately $50,000 over the next two years to roll
out the service.
43
<PAGE>
ACNielsen Corporation
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
Note 5. Acquisitions and Other Investments (Continued)
In addition, the Company purchased 3,992,455 shares of preferred stock of
NetRatings for $12,534 and purchase costs of $603. These preferred shares were
converted to 1,996,228 shares of common stock on December 8, 1999, in
conjunction with the NetRatings initial public offering. The Company is
restricted from sale of any of these shares for one year from date of
acquisition, and, thereafter, is subject to certain volume restrictions of Rule
144 under the Securities Act of 1933. The cost of the NetRatings investment is
reported within the Other Investments section of the Consolidated Balance Sheet.
The market value of the investment at December 31, 1999 was $96,068.
In 1999, 1998 and 1997, the Company also acquired interests in various
companies in separate transactions that were accounted for as purchases. The
aggregate purchase price of such acquisitions in 1999 totaled $42,024, including
contractual obligations and other future costs of $14,772 payable in 2000.
Payments of $10,652 were made during 1999 for prior year acquisitions. The
largest acquisitions in 1999 were Media Monitoring Services Ltd. ("MMS") and
Market Decisions. The Company also acquired a business in France and increased
its ownership in businesses in Italy and Korea.
MMS, acquired on November 30, 1999, is a provider of advertising
measurement services in the United Kingdom, Australia, and Asia. The purchase
price of $19,804 was paid on the acquisition date. This purchase price and the
estimated purchase costs have been allocated to the identifiable net assets
acquired on a preliminary basis, resulting in goodwill of $14,672. This goodwill
will be amortized over 40 years.
On June 30, 1999, the Company acquired the remaining 55% interest it did
not already own in Market Decisions, a business that provides controlled market
and in-store testing of new and established consumer products in the United
States. The purchase price was comprised of an initial cash payment of $3,943
and a deferred payment due in the year 2000, which will not be less than $3,625
or more than $6,375, depending on the achievement of certain operating goals.
The excess of the guaranteed purchase price and estimated purchase costs, over
the fair value of the identified net assets at the date of acquisition amounted
to $10,873 has been recorded as goodwill, and will be amortized over 40 years.
The purchase price allocation for MMS and Market Decisions has been
prepared on a preliminary basis, and changes are expected as integration plans
are finalized.
The aggregate purchase price of acquisitions made in 1998 and 1997 totaled
$131,247 and $39,674, respectively. The largest acquisitions in 1998 were BBI
Marketing Services, Inc. ("ACNielsen BASES") and ANR Amer Nielsen Research
Limited ("ANR"), while the largest acquisition in 1997 was Entertainment Data
Inc. ("EDI").
On June 30, 1998, the Company acquired ACNielsen BASES. The final purchase
price was $70,448 (exclusive of payments contingent on achieving future
operating goals). Included in the purchase price was $6,575 of direct
acquisition and integration costs consisting of $830 for severance, $2,380 for
licensee termination fees, and $3,365 for other costs, primarily investment
banking, legal and accounting fees. These costs were incremental, and the
integration costs were a direct result of the formal plan to exit certain
activities as part of the overall integration effort. As of December 31, 1999,
the balance of accrued acquisition and integration costs totaled $2,574. These
amounts are scheduled per contractual terms to be disbursed in 2000 and 2001. In
the third quarter of 1999, the Company made a contingent payment to the sellers
totaling $825. In the fourth quarter of 1999, the Company accrued an additional
$10,034 of estimated contingent consideration due the sellers for achieving
certain operating objectives during the initial 18 months of integration. This
amount will be payable in 2000. Including this additional contingent
consideration, the excess of the purchase price over the fair value of
identifiable net assets (goodwill) totaled $73,399 and is being amortized over
40 years. The Company may also be required to make further cash payments if
ACNielsen BASES achieves certain operating objectives during 2000. The maximum
amount of additional contingent consideration relating to 2000 objectives is
approximately $25,000, payable in 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 final purchase price,
exclusive of payments contingent on achieving future operating goals, was
$43,999. This purchase price included $969 of acquisition costs for legal and
accounting services and reflected two remaining installment payments due in
January 2000 and 2001 for $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 $43,233 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.
In 1997, the largest acquisition was Entertainment Data, Inc. ("EDI"), a
provider of box office information for the motion picture industry. The final
purchase price of $26,521 included a $4,000 interest-bearing promissory note
payable, of which $1,000 was paid in 1999, with the remainder anticipated to be
due in 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.
The results of operations of all purchases are included in the Consolidated
Statements of Income from dates of acquisition. Had the acquisitions made in
1999, 1998 and 1997 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.
44
<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 and Canadian 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 other 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.
The components of pension and other postretirement costs for the years
ending 1999, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
Pension Benefits Other Postretirement Benefits
- - ---------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997
=====================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Service cost on benefits
earned during the year $ 12,068 $ 10,436 $ 8,808 $ 376 $ 354 $ 404
Interest cost on projected
benefit obligation 17,114 16,970 16,621 476 406 469
Expected return on plan assets (24,280) (23,853) (22,190) -- -- --
Amortization of transition
(asset) obligation (2,401) (2,574) (2,626) 38 -- --
Amortization of prior-service cost
(benefit) 1,263 1,187 1,131 (20) (120) (120)
Amortization of net loss 85 392 404 -- -- 77
Settlement and curtailment (gain) (357) (18) -- -- -- --
- - ---------------------------------------------------------------------------------------------------------------------
Net pension and
postretirement costs $ 3,492 $ 2,540 $ 2,148 $ 870 $ 640 $ 830
=====================================================================================================================
</TABLE>
The prior-service cost (benefit) 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.
45
<PAGE>
ACNielsen Corporation
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
Note 6. Pension and Other Postretirement Benefit Plans (Continued)
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,
1999 and 1998:
<TABLE>
<CAPTION>
Pension Benefits Other Postretirement Benefits
- - ---------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998
=====================================================================================================================
<S> <C> <C> <C> <C>
Reconciliation of benefit obligation
Obligation at January 1 $ 286,061 $ 270,792 $ 6,710 $ 7,229
Service cost 12,068 10,436 376 354
Interest cost 17,114 16,970 476 406
Participant contributions 1,484 1,524 32 21
Plan amendments 1,652 1,874 -- --
Actuarial (gain) loss (5,723) 10,907 (1,213) (1,227)
Benefit payments (14,017) (14,555) (123) (73)
Curtailments -- (751) -- --
Settlement payments -- (10,663) -- --
Transfers -- 240 734 --
Effect of change in foreign exchange rates (11,750) (713) 35 --
- - ---------------------------------------------------------------------------------------------------------------------
Obligation at December 31 $ 286,889 $ 286,061 $ 7,027 $ 6,710
=====================================================================================================================
Reconciliation of fair value of plan assets
Fair value of plan assets at January 1 $ 332,853 $ 301,038 $ -- $ --
Actual return on plan assets 40,981 44,308 -- --
Employer contributions 6,910 12,361 91 52
Participant contributions 1,484 1,524 32 21
Benefit payments (14,017) (14,555) (123) (73)
Settlement payments -- (10,663) -- --
Transfers -- 240 -- --
Effect of change in foreign exchange rates (13,956) (1,400) -- --
- - ---------------------------------------------------------------------------------------------------------------------
Fair value of plan assets at December 31 $ 354,255 $ 332,853 $ -- $ --
=====================================================================================================================
Funded Status
Funded status at December 31 $ 67,366 $ 46,792 $(7,027) $(6,710)
Unrecognized transition (asset) obligation (6,207) (8,993) 730 --
Unrecognized prior-service cost (benefit) 8,259 7,985 -- (20)
Unrecognized (gain) loss (43,847) (22,734) (569) 644
- - ---------------------------------------------------------------------------------------------------------------------
Net amount recognized in the balance sheet $ 25,571 $ 23,050 $(6,866) $(6,086)
=====================================================================================================================
</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,
1999 and 1998:
<TABLE>
<CAPTION>
Pension Benefits Other Postretirement Benefits
- - ---------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998
=====================================================================================================================
<S> <C> <C> <C> <C>
Prepaid benefit cost $ 69,363 $ 61,844 $ -- $ --
Accrued benefit liability (44,345) (39,239) (6,866) (6,086)
Intangible asset 553 445 -- --
- - ---------------------------------------------------------------------------------------------------------------------
Net amount recognized in the balance sheet $ 25,571 $ 23,050 $(6,866) $(6,086)
=====================================================================================================================
</TABLE>
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 $39,533, $26,684 and $0, respectively,
at December 31, 1999 and $30,305, $21,845 and $0, respectively, at December 31,
1998. The Company's plan for postretirement benefits other than pensions has no
plan assets.
<TABLE>
<CAPTION>
Pension Benefits Other Postretirement Benefits
- - ----------------------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997
================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Discount rate 6.49% 6.09% 6.77% 7.67% 6.75% 7.00%
Expected long-term rate of
return on plan assets 8.03% 7.76% 8.52% n/a n/a n/a
Rate of increase in future
compensation levels 3.96% 3.62% 3.95% 4.59% 4.16% 4.16%
================================================================================================================
</TABLE>
A 7.5% annual rate of increase in the per capita cost of covered health
care benefits was assumed for 1999. The rate was assumed to decrease gradually
each year to a rate of 5.5% by the year 2004 and remain constant thereafter.
46
<PAGE>
Note 6. Pension and Other Postretirement Benefit Plans (Continued)
A 1% change in assumed health care cost trend rates would have the
following effects:
<TABLE>
<CAPTION>
1% Increase 1% Decrease
=============================================================================================
<S> <C> <C>
Effect on total service and interest cost components of net
periodic postretirement health care benefit cost $ 95 $ 84
Effect on the health care component of the accumulated
postretirement benefit obligation $814 $729
=============================================================================================
</TABLE>
Defined Contribution Plans
The Company has an Employee Stock Ownership Plan (ESOP) for the benefit of
substantially all 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 172,346, 171,352 and 221,466 shares, and recognized
compensation expense of $4,523, $4,267 and $4,005 for the years 1999, 1998 and
1997, respectively.
Note 7. Employee Stock and Related Plans
In 1996, the Company adopted three stock incentive plans that reserved
shares of common stock for issuance to key employees and non-employee directors.
A total of 18,300,000 shares have been reserved for issuance under these plans.
Under these stock incentive plans, 958,833 shares of common stock were available
for future grants as of December 31, 1999. The plans provide that shares granted
come from the Company's authorized but unissued common stock or treasury stock.
The price of options granted pursuant to these plans will not be less than the
fair market value of the shares on the date of grant. Stock options have a term
of ten years and vest over four or six years. In addition, 4,948,055 options
granted during the last two months of 1996 and the first half of 1997 may vest
earlier if the Company's stock price reaches certain targets ("effective-date
options").
One-half of the effective-date options outstanding on September 11, 1997
(2,393,527 shares) vested 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.
During 1999, 767,500 options were granted to senior management, have a term
of ten years and vest in 9.5 years unless the Company's stock price reaches
$32.75. If the Company's stock price reaches $32.75, these options will vest
over a four-year period starting retroactively from the grant date.
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, 1999, 3,857,331 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 fourth stock incentive plan, which reserved 1,000,000 shares of common
stock for issuance to key employees. 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 by December 31,
2000. Under this plan, options for 1,000,000 shares were granted and no shares
of common stock were available for future grants as of December 31, 1999.
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, the Company's net income and net earnings per share
would have been reduced to the pro forma amounts indicated below.
<TABLE>
<CAPTION>
1999(1) 1998 1997
===============================================================================================
<S> <C> <C> <C>
Net Income-as reported $ 56,967 $ 57,209 $ 35,897
Net Income-pro forma $ 50,278 $ 50,137 $ 23,889
Basic earnings per share-as reported $ .99 $ 1.00 $ .63
Basic earnings per share-pro forma $ .87 $ .88 $ .42
Diluted earnings per share-as reported $ .95 $ .96 $ .62
Diluted earnings per share-pro forma $ .84 $ .84 $ .41
===============================================================================================
</TABLE>
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.
(1)Includes the cumulative effect of adopting SOP 98-5, "Reporting on the
Costs of Start-Up Activities," which resulted in a charge of $20,173, net of
tax, or $.35 per basic or $.34 per diluted share.
47
<PAGE>
ACNielsen Corporation
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
Note 7. Employee Stock and Related Plans (Continued)
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:
<TABLE>
<CAPTION>
1999 1998 1997
===============================================================================================
<S> <C> <C> <C>
Expected dividend yield -- -- --
Expected stock price volatility 35% 30% 30%
Risk-free interest rate 6.16% 4.89% 5.90%
Expected holding period of options 4.0 years 4.2 years 4.1 years
===============================================================================================
</TABLE>
The weighted average fair value of options granted during 1999, 1998 and
1997 was $8.55, $8.25 and $6.22 per share, respectively.
The following is a summary of stock option activity and number of shares
reserved for outstanding options:
<TABLE>
<CAPTION>
Average option price
Shares per share
==============================================================================================
<S> <C> <C>
Options outstanding at January 1, 1997 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
Granted 4,278,050 23.48
Exercised (816,669) 15.51
Canceled or Expired (220,280) 20.27
- - -----------------------------------------------------------------------------------------
Options outstanding at December 31, 1999 13,435,114 $20.60
=========================================================================================
</TABLE>
The following is a summary of shares exercisable, average remaining life
and average option price per share of options outstanding at December 31, 1999:
<TABLE>
<CAPTION>
Shares Outstanding Shares Exercisable
------------------------------------ -----------------------
Number Average Average Number Average
of option price remaining of option price
shares per share life shares per share
====================================================================================================================
<S> <C> <C> <C> <C> <C>
Options granted prior to June, 1997 5,668,789 $15.72 6.2 years 4,803,735 $15.73
Options granted subsequent to June, 1997 7,766,325 24.16 8.5 years 837,361 24.16
- - --------------------------------------------------------------------------------------------------------------------
Options outstanding at December 31, 1999 13,435,114 $20.60 8.0 years 5,641,096 $16.98
====================================================================================================================
Option prices range from $11.10 to $30.82.
</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 expired on December 9,
1999. (Credits) charges to income in 1999, 1998 and 1997 with respect to this
program totaled ($45), $958 and $3,212, respectively.
48
<PAGE>
Note 8. Income Taxes
Income before provision for income taxes consisted of:
1999 1998 1997
================================================================================
U.S. $ 50,443 $ 30,742 $ 56,221
Non-U.S. 78,123 67,874 12,323
- - --------------------------------------------------------------------------------
$ 128,566 $ 98,616 $ 68,544
================================================================================
The provision (benefit) for income taxes consisted of:
1999 1998 1997
================================================================================
U.S. Federal and state:
Current $ 4,382 $ 4,348 $ 6,790
Deferred 4,181 (2,329) 10,286
- - --------------------------------------------------------------------------------
Total 8,563 2,019 17,076
- - --------------------------------------------------------------------------------
Non-U.S.:
Current 51,220 35,974 25,781
Deferred (8,357) 3,414 (10,210)
- - --------------------------------------------------------------------------------
Total 42,863 39,388 15,571
- - --------------------------------------------------------------------------------
Total $ 51,426 $ 41,407 $ 32,647
================================================================================
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>
1999 1998 1997
============================================================================================================
<S> <C> <C> <C>
Tax expense at the U.S. statutory rate $ 44,998 $ 34,516 $ 23,990
State and local income taxes, net of Federal effect 1,639 999 1,827
Reduction in the valuation allowance (10,441) (6,212) (6,313)
Non-U.S. taxes 12,168 15,648 8,063
Other 3,062 (3,544) 5,080
- - ------------------------------------------------------------------------------------------------------------
Provision for Income Taxes $ 51,426 $ 41,407 $ 32,647
============================================================================================================
</TABLE>
The Company's deferred tax assets (liabilities) are comprised of the
following at December 31, 1999 and 1998:
1999 1998
=====================================================================
Deferred Tax Assets:
Operating Losses $ 53,259 $ 53,384
Employee Benefits 14,680 13,670
Other Accruals 18,998 19,328
Bad Debts 3,647 3,783
- - ---------------------------------------------------------------------
90,584 90,165
Valuation Allowance (44,616) (55,057)
- - ---------------------------------------------------------------------
45,968 35,108
- - ---------------------------------------------------------------------
Deferred Tax Liabilities:
Postretirement Benefits (23,724) (17,664)
Intangibles and Deferred Charges (12,017) (20,483)
Fixed Assets (9,207) (7,509)
Other Assets (13,704) (14,485)
- - ---------------------------------------------------------------------
(58,652) (60,141)
- - ---------------------------------------------------------------------
Net Deferred Tax Liability $(12,684) $(25,033)
=====================================================================
During the year ended December 31, 1999, the valuation allowance decreased
by $10,441. The reduction was primarily due to changes in economic circumstances
that made the utilization of certain non-U.S. net operating loss carryforwards
more likely than not.
U.S. operating loss carryforwards of approximately $14,000 will expire
ratably from 2011 through 2013. Non-U.S. loss carryforwards of $42,269 will
expire at various times through 2004. Non-U.S. loss carryforwards of $69,918
have an indefinite life. An income tax benefit of $2,803 and $1,371 related to
employee stock options was credited to shareholders' equity in 1999 and 1998,
respectively. No provision was made for U.S. taxes payable on undistributed
earnings of non-U.S. subsidiaries amounting to approximately $240,878, $224,918
and $167,400 in 1999, 1998 and 1997, respectively, as such amounts are
permanently reinvested.
49
<PAGE>
ACNielsen Corporation
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
Note 9. Short-Term Debt
The Company maintains a $250,000 committed bank credit facility with a
global bank syndicate comprising 12 banks. This bank credit facility is
unsecured and has a three-year term ending April 2001. The 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, 1999, the Company was in
compliance with such requirements. At December 31, 1999 and 1998, $95,139 and
$24,308, 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, uncommitted lines of
credit with six banks, totaling $90,000, to meet short-term cash requirements of
the business. These unsecured lines of credit provide loans at floating interest
rates. At December 31, 1999 and 1998, $0 and $16,100, respectively, were
outstanding under these arrangements.
The weighted-average interest rates on short-term debt at December 31, 1999
and 1998 were 3.32% and 2.90%, respectively. The Company's short-term borrowings
at December 31, 1999 and 1998 were in the United States and Japan.
Note 10. Derivative Instruments and Hedging Activities
The Company adopted SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities" on January 1, 1999. In accordance with the transition
provisions of SFAS No. 133, the company recorded a cumulative-effect expense of
$63 in other comprehensive income to recognize at fair value all derivatives
that are designated as cash-flow and foreign currency cash-flow hedging
instruments.
The Company receives management fees and royalties from its non-U.S.
subsidiaries. Additionally, the Company's European subsidiaries purchase data
services from a third-party provider in the United Kingdom. The Company uses
foreign-currency forward-exchange contracts with durations of less than 12
months, to hedge against the effect of exchange-rate fluctuations on these
forecasted cash flows. Based on the Company's estimate of future foreign
exchange rates, it hedges up to 85% of these forecasted cash flows.
All derivatives are recognized on the balance sheet at their fair value. On
the date a forward contract is entered into, the Company designates the
derivative as a cash-flow or foreign-currency cash-flow hedge. Changes in the
fair value of a derivative that is highly effective as--and that is designated
and qualifies as--a foreign-currency cash-flow hedge are recorded in other
comprehensive income. The company formally documents all relationships between
hedging instruments and hedged items, as well as its risk-management objective
and strategy for undertaking hedge transactions. This process includes linking
all derivatives that are designated as foreign-currency hedges to specific
forecasted transactions. The Company also formally assesses, both at the hedge's
inception and on an ongoing basis, whether the derivatives that are used in
hedging transactions are highly effective in offsetting changes in cash flows of
hedged items.
As of December 31, 1999, deferred net gains of $90 on derivative
instruments accumulated in other comprehensive income are expected to be
reclassified to earnings during the next 12 months. Transactions and events that
are expected to occur over the next 12 months which will necessitate
reclassifying to earnings these derivative gains include royalty payments.
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, 1999, 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 that 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.
50
<PAGE>
Note 11. Capital Stock (Continued)
The terms of the Indemnity and Joint Defense Agreement (see Note 13) 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 1999, the Company
repurchased 593,600 shares of its Common Stock for a total of $14,608.
Note 12. 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 1999, 1998 and 1997 was $41,135,
$39,361 and $37,021, respectively.
The Company also leases or participates with others 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 $24,146, $26,248 and $23,141 for 1999,
1998 and 1997, respectively.
At December 31, 1999, 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
==============================================================
2000 $30,647 $15,877
2001 26,447 11,119
2002 22,293 5,953
2003 17,199 2,527
2004 13,842 1,576
Thereafter 11,837 2,563
------------------------------------------------------------
$122,265 $39,615
============================================================
The Company has agreements with third parties, for certain data processing
services, extending beyond one year. At December 31, 1999, the minimum annual
services covered by these agreements are approximately as follows:
Years Ended
============================================================
2000 $14,733
2001 7,437
2002 3,770
2003 3,249
2004 1,125
Thereafter --
------------------------------------------------------------
$30,314
============================================================
Note 13. 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 a
predecessor 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 defendants and that 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 60 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.
51
<PAGE>
ACNielsen Corporation
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
Note 13. Litigation (Continued)
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 14. Supplemental Financial Data
Accounts Receivable-Net: 1999 1998
================================================================================
Trade $ 237,529 $ 232,167
Less: allowance for doubtful accounts (10,328) (13,890)
Unbilled receivables 33,156 30,975
Other 33,909 30,456
- - --------------------------------------------------------------------------------
$ 294,266 $ 279,708
Other Current Assets: 1999 1998
Deferred taxes $ 26,704 $ 26,449
Prepaid expenses 35,337 30,078
- - --------------------------------------------------------------------------------
$ 62,041 $ 56,527
Property, Plant and Equipment-Net: 1999 1998
Land $ 3,990 $ 4,376
Buildings 46,819 48,504
Computer Hardware and Other Equipment 354,800 353,226
Leasehold Improvements 40,357 32,994
Less: accumulated depreciation and amortization (286,866) (281,436)
- - --------------------------------------------------------------------------------
$ 159,100 $ 157,664
================================================================================
52
<PAGE>
Note 14. Supplemental Financial Data (Continued)
<TABLE>
<CAPTION>
Intangibles
and Computer
Intangibles and Other Assets, Computer Software and Goodwill: Other Assets Software Goodwill
====================================================================================================================================
<S> <C> <C> <C>
January 1, 1998 $ 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 exchange, asset write-offs and other 1,415 593 (2,994)
December 31, 1998 69,889 42,588 328,326
Additions at cost 8,033 40,862 40,447
Amortization (4,393) (18,146) (12,345)
Increase in deferred income taxes 13,835 -- --
Start-up cost write-off (30,503) -- --
Foreign exchange, asset write-offs and other (3,811) (994) (3,064)
- - ------------------------------------------------------------------------------------------------------------------------------------
December 31, 1999 $ 53,050 $ 64,310 $ 353,364
====================================================================================================================================
</TABLE>
Accumulated amortization of intangibles and other assets, computer
software, and goodwill was $185,791 and $172,974 at December 31, 1999 and 1998,
respectively.
Accounts Payable: 1999 1998
===========================================================================
Trade $ 50,074 $ 53,542
Taxes other than income taxes 26,592 29,641
Other 6,433 7,748
- - ---------------------------------------------------------------------------
$ 83,099 $ 90,931
===========================================================================
Accrued and Other Current Liabilities: 1999 1998
===========================================================================
Salaries, wages, bonuses and other compensation $ 83,748 $ 85,112
Deferred revenue and advance billings 53,881 44,715
Postemployment benefits 20,400 18,665
Other 141,988 156,104
- - ---------------------------------------------------------------------------
$300,017 $304,596
===========================================================================
Note 15. 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 &
Africa, and Asia Pacific. A senior executive is responsible for the performance
of each geographic region. Additionally in 1999, the Company formed a venture to
launch a global Internet Measurement Service, known as ACNielsen eRatings.com
(See Note 5). The results of this venture are reported and evaluated separately
by company management. The Company evaluates regional performance based on
operating income, excluding special charges, incremental costs of Year 2000
computer software modifications and ACNielsen eRatings.com.
Financial information by reporting segment is summarized as follows.
Inter-area sales were not significant.
<TABLE>
<CAPTION>
Operating Depreciation
Operating Income & Capital Computer
Revenue (Loss) Assets Amortization Expenditures(2) Software
<S> <C> <C> <C> <C> <C> <C>
1999
United States $ 478,146 $ 56,364 $ 361,317 $ 28,772 $ 13,164 $ 15,727
Canada/Latin America 180,665 28,515 141,661 8,670 7,488 2,462
Total Americas 658,811 84,879 502,978 37,442 20,652 18,189
Europe, Middle East & Africa 594,509 30,511 504,807 28,314 22,932 20,703
Asia Pacific 272,055 19,566 219,015 17,364 14,979 1,970
Subtotal 1,525,375 134,956 1,226,800 83,120 58,563 40,862
ACNielsen eRatings.com -- (1,092) 1,086 16 20 --
- - ---------------------------------------------------------------------------------------------------------------------------------
Total $1,525,375 $ 133,864 $1,227,886 $ 83,136 $ 58,583 $ 40,862
=================================================================================================================================
</TABLE>
53
<PAGE>
ACNielsen Corporation
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
Note 15. Operations by Geographic Segment (Continued)
<TABLE>
<CAPTION>
Operating Depreciation
Operating Income & Capital Computer
Revenue (Loss) 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 & 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 & 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
=================================================================================================================================
</TABLE>
Reconciliation of Segment Operating Income to Pre-Tax Income:
1999 1998 1997
=============================================================================
Segment Operating Income $ 133,864 $ 107,542 $ 60,756
Special Charge(1) -- -- (36,000)
Year 2000 Expenses (12,078) (15,911) --
-----------------------------------------------------------------------------
Reported Operating Income 121,786 91,631 24,756
Other Income--Net(3) 6,780 6,985 43,788
-----------------------------------------------------------------------------
Pre-Tax Income $ 128,566 $ 98,616 $ 68,544
=============================================================================
(1) The 1997 special charge of $36,000 ($2,200 in Canada/Latin America, $4,000
in Europe, Middle East & 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 $48,480,
$142,342 and $46,067 in 1999, 1998 and 1997, respectively.
(3) 1997 Other Income-Net includes a non-operating gain on sale of investments
of $39,039.
Note 16. Earnings per Share
<TABLE>
<CAPTION>
1999 1998 1997
====================================================================================================================================
<S> <C> <C> <C>
Weighted-average number of shares outstanding basic EPS 57,806 57,236 57,139
Dilutive effect of shares issuable as of year-end under stock option plans 1,901 2,010 976
Adjustment of shares applicable to stock options and stock
appreciation rights exercised during the year 292 588 254
Weighted-average number of shares outstanding and
common stock equivalents diluted EPS 59,999 59,834 58,369
- - ------------------------------------------------------------------------------------------------------------------------------------
Net income $56,967(1) $57,209 $35,897
- - ------------------------------------------------------------------------------------------------------------------------------------
Basic earnings per share $ .99(1) $ 1.00 $ .63
- - ------------------------------------------------------------------------------------------------------------------------------------
Diluted earnings per share $ .95(1) $ .96 $ .62
====================================================================================================================================
</TABLE>
(1) Includes the cumulative effect of adopting SOP 98-5, "Reporting on the
Costs of Start-Up Activities," which resulted in a charge of $20,173, net
of tax, or $.35 per basic or $.34 per diluted share.
Options to purchase 2,766,400 shares of common stock at share prices
ranging from $23.81 to $30.82 and 1,309,900 shares of common stock at share
prices ranging from $26.19 to $27.75 per share were outstanding at the end of
the years 1999 and 1998, 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.
54
<PAGE>
Note 17. Subsequent Event-Operation Leading Edge
On February 17, 2000, the Board of Directors approved Operation Leading
Edge, the Company's plan to accelerate its growth beyond 2000, through a series
of business-building initiatives. The initiatives, which will span three years,
are designed to accelerate both revenue and profit growth by enhancing products
and services, addressing changing client needs, improving efficiency, and
reducing the Company's cost structure, with anticipated benefits starting in
2000 and building to $60,000 annually by 2002.
The plan will result in a series of pre-tax charges, spread over three
years, totaling approximately $180,000. Management estimates that $70,000 will
be recorded in 2000, $80,000 in 2001, and the balance in 2002. Approximately
$160,000 of the charges will require cash expenditures. Net cash outlays will be
about $60,000, after about $100,000 in anticipated savings over the three-year
period. It is expected that the total workforce will be reduced by approximately
5% or 1,300 positions, primarily in the EMEA region. The reductions are expected
to come from a combination of attrition and severance.
Operation Leading Edge has two elements:
o Creating new capabilities by improving the flexibility of the Company's
information processing and content delivery systems, including leveraging
the capabilities of the Internet. The improved systems will enable the
Company to deliver harmonized information across borders, and more easily
combine information from a variety of sources, speeding the development of
products that deliver higher value and greater insights to clients. This
element is estimated to represent about 75% of the cost of Operation
Leading Edge.
o Streamlining back-office and administrative functions and rationalizing
facilities. This element represents the remaining cost of the plan.
There were no charges to income with respect to this program in 1999.
Note 18. Quarterly Financial Data (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------------------------------
March 31 June 30 September 30 December 31 Year
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
1999
Operating Revenue $ 353,951 $ 380,700 $ 381,911 $ 408,813 $1,525,375
Operating Income $ 7,376 $ 34,191 $ 36,945 $ 43,274 $ 121,786
Income Before Cumulative Effect
of Change in Accounting Principle(1) $ 5,964 $ 20,905 $ 23,419 $ 26,852 $ 77,140
Net Income (Loss) $ (14,209) $ 20,905 $ 23,419 $ 26,852 $ 56,967
Earnings per Share Before Cumulative Effect of
Change in Accounting Principle(1)
Basic $ .10 $ .36 $ .40 $ .46 $ 1.33
Diluted $ .10 $ .35 $ .39 $ .45 $ 1.29
Average Number of Shares Outstanding:
Basic 57,554 57,808 57,952 57,902 57,806
Diluted 59,622 60,147 60,128 59,325 59,999
====================================================================================================================================
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
====================================================================================================================================
</TABLE>
(1) Excludes the cumulative effect of adopting SOP 98-5, "Reporting on the
Costs of Start-Up Activities", which resulted in a charge in the first
quarter of 1999 of $20,173, net of income tax benefits of $10,330 or $0.35
per basic share or $0.34 per diluted share.
55
<PAGE>
ACNielsen Corporation
Summary Financial Data
(Dollar amounts in millions, except per share data)
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------------------------------------
1999 1998 1997 1996 1995(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Operating Revenue $ 1,525 $ 1,425 $ 1,392 $ 1,359 $ 1,281
Income (Loss) Before Cumulative Effect of
Change in Accounting Principle $ 77 $ 57 $ 36 $ 16 $ (231)
Actual and Pro Forma Earnings (Loss)
Per Share of Common Stock Before
Cumulative Effect of Change in Accounting:
Basic(2) $ 1.33 $ 1.00 $ .63 $ .28 $ (4.09)
Diluted(2) $ 1.29 $ .96 $ .62 $ .28 $ (4.09)
Balance Sheet Data:
Total Assets $ 1,228 $ 1,126 $ 1,039 $ 1,036 $ 943
Long-term Debt $ 14 $ 23 $ 8 $ 3 $ 6
====================================================================================================================================
</TABLE>
(1) Income (Loss) Before Cumulative Effect of Change in Accounting Principle 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) 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.
56
EXHIBIT 21
<TABLE>
<CAPTION>
ACNIELSEN CORPORATION
LIST OF SUBSIDIARIES - 1/31/00
- - -----------------------------------------------------------------------------------------------------------------------------------
State or % Ownership
Name Country of 100% Except
Incorporation as Noted
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
A. C. NIELSEN COMPANY Delaware
A. C. Nielsen Ges.mbH Austria
ACNielsen Piackutato Kft. Hungary
A. C. Nielsen Company (Belgium) S.A. Belgium
A. C. Nielsen Company & Co. S.A. Belgium
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
ACNielsen Bulgaria Limited Bulgaria
ANR Istrazivanje Trzista Croatia
ACNielsen Eesti OU Estonia
ACNielsen Ghana, Limited Ghana
ACNielsen Kazakhstan Kazakhstan
ACNielsen Kenya Limited Kenya
ACNielsen Latvia SIA Latvia
UAB ACNielsen Baltics Lithuania
ACNielsen Limited SRL Moldova
ACNielsen Nigeria Limited Nigeria
ZAO ACNielsen Russia
ACNielsen Slovakia s.r.o. Slovakia
ACNielsen raziskovalna druzba, d.o.o. Slovenia
ACNielsen Uganda Limited Uganda
ACNielsen Ukraine CJSC Ukraine
ACNielsen AIM A/S Denmark
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
<PAGE>
A. C. NIELSEN COMPANY (Continued)
A. C. Nielsen S.A. (Continued)
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
ACNielsen Japan K.K. Japan
A. C. Nielsen, S.A. de C.V. Mexico
ACNielsen Centroamerica, S.A. Guatemala
ACNielsen Costa Rica S.A. Costa Rica
ACNielsen El Salvador, S.A. de C.V. El Salvador
ACNielsen de Honduras S.A. de C.V. Honduras
ACNielsen Nicaragua S.A. Nicaragua
ACNielsen Panama, S.A. Panama
ACNielsen (Nederland) B.V. The Netherlands
ACNielsen Czech Republic s.r.o. Czech Republic
ACNielsen (Polen) B.V. The Netherlands
ACNielsen d.o.o. Croatia
ACNielsen Polska 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
ACNielsen ZET Arastirma Hizmetleri A.S. Turkey 85.0
Neslein Holding (Brazil) C.V. The Netherlands
ART Holding (Brazil) C.V. The Netherlands
ACNielsen do Brasil Ltda. Brazil
ACNielsen.CBPA Ltda. Brazil
ACNielsen Cayman Islands Ltd. Cayman Islands
ASEE Nielsen Holding (Brazil) C.V. The Netherlands
<PAGE>
A. C. NIELSEN COMPANY (Continued)
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
Neslein Holding (Spain) C.V. The Netherlands
ASEE Nielsen Holding (Spain) Srl Spain
N&P Holding Spain Srl Spain
A. C. Nielsen Company Srl. Spain
Infoadex S.A. Spain 50.0
ACNielsen EDI, S.L. Spain
Panel Internacional S.A. Spain
Menesta Investments B.V. Netherlands
Neslein Holding (Portugal) SGPS, Lda. Portugal
A.C. Nielsen Portugal - Estudos de Mercado S.A. Portugal
ACNielsen (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
A. C. Nielsen (Argentina) S.A. Delaware
A.C. Nielsen Argentina S.A. Argentina
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
ACNIELSEN EDI, INC. California
<PAGE>
ACNIELSEN EDI II, INC. California
ACNIELSEN EDI GMBH Germany
ACN Marketing Research Holding GmbH Germany
A. C. Nielsen GmbH Germany
A. C. Nielsen Werbeforschung S&P GmbH Germany
ACNIELSEN ERATINGS.COM Delaware 80.1
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 Corporation Japan Japan
Hankook Research Co. Ltd. Korea 50.0
ACNielsen (Malaysia) Sdn. Bhd. Malaysia
ACNielsen Marketing Promotions (Malaysia) Sdn. Bhd. Malaysia
ACNielsen (Philippines) Inc. Philippines
ACNielsen Research (Singapore) Pte. Ltd. Singapore
ACNielsen (Thailand) Limited Thailand
ACNielsen (Vietnam) Limited Vietnam
ACNIELSEN HOLDINGS UK LIMITED England
A.C. Nielsen Company Limited England
ACNielsen EDI Limited England
Media Monitoring Services Ltd. England
<PAGE>
ACNIELSEN INTERNATIONAL RESEARCH (UNITED STATES) LIMITED New York
ACNIELSEN (ISRAEL) LTD. Israel 90.0
ACNIELSEN MARKET DECISIONS, INC. Delaware
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 HOLDINGS (AUSTRALIA) C.V. The Netherlands
ACNielsen (Holdings) Pty. Limited Australia
AGB McNair Holdings Pty. Limited Australia
Surveys Australia Research Pty. Limited Australia
ACNielsen Research Pty. Limited Australia
McNair Anderson Associates Pty. Limited Australia
ACNielsen Advanced Analytics Pty. Limited Australia
</TABLE>
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, 333-58885 and
333-31152) of our report dated February 17, 2000 incorporated by reference in
ACNielsen Corporation's Form 10-K for the year ended December 31, 1999 and to
all references to our Firm included in this Form 10-K.
/s/ARTHUR ANDERSEN LLP
Stamford, Connecticut
March 23, 2000
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, 1999 of ACNielsen Corporation on Form 10-K and any and all
amendments thereto and to file the same with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
or his or her substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
This Power of Attorney has been signed by the following persons in the
capacities indicated on February 17, 2000.
Name Title
------ -------
___________________________________ Chairman, Chief Executive Officer
Nicholas L. Trivisonno and Director
___________________________________ 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/JOHN R. MEYER Director
___________________________________
John R. Meyer
/s/BRIAN B. PEMBERTON Director
___________________________________
Brian B. Pemberton
/s/ROBERT N. THURSTON Director
___________________________________
Robert N. Thurston
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 135,199
<SECURITIES> 0
<RECEIVABLES> 294,266
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 491,506
<PP&E> 445,966
<DEPRECIATION> 286,866
<TOTAL-ASSETS> 1,227,886
<CURRENT-LIABILITIES> 566,586
<BONDS> 0
0
0
<COMMON> 599
<OTHER-SE> 521,237
<TOTAL-LIABILITY-AND-EQUITY> 1,227,886
<SALES> 0
<TOTAL-REVENUES> 1,525,375
<CGS> 0
<TOTAL-COSTS> 1,403,589
<OTHER-EXPENSES> (3,324)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (3,456)
<INCOME-PRETAX> 128,566
<INCOME-TAX> 51,426
<INCOME-CONTINUING> 77,140
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (20,173)
<NET-INCOME> 56,967
<EPS-BASIC> .99
<EPS-DILUTED> .95
</TABLE>
Exhibit 99(c)
Gartner Group, Inc.
P.O. Box 10212
56 Top Gallant Road
Stamford, CT 06904
July 16, 1999
R.H. Donnelley Corporation
One Manhattanville Road
Purchase, NY 10577
ACNielsen Corporation
177 Broad Street
Stamford, CT 06901
Dear Sirs:
Reference is made to (i) the Distribution Agreement (the "1996
Distribution Agreement"), dated as of October 28, 1996, among Cognizant
Corporation, which has been renamed Nielsen Media Research, Inc. ("NMR"), The
Dun & Bradstreet Corporation, which has been renamed the R.H. Donnelley
Corporation ("RHD") and ACNielsen Corporation ("ACNielsen") and (ii) the letter
of undertaking dated June 29, 1998 from IMS Health Incorporated ("IMS HEALTH")
to RHD and ACNielsen. In June 1998, NMR distributed to its stockholders all of
the outstanding shares of common stock of IMS HEALTH (the "IMS HEALTH
Distribution"). IMS HEALTH has announced its intention to distribute (the
"Gartner Distribution") to its stockholders all of the shares of the Class B
Common Stock of Gartner Group, Inc. ("Gartner") that IMS HEALTH will hold
following the recapitalization of Gartner contemplated by the Agreement and Plan
of Merger dated June 17, 1999, among IMS HEALTH, Gartner and GRGI, INC. In
connection with the IMS HEALTH Distribution, IMS HEALTH undertook (the "IMS
HEALTH Undertaking") to both RHD and ACNielsen to be jointly and severally
liable for all Cognizant Liabilities (as defined in the 1996 Distribution
Agreement). Under Section 8.9(c) of the 1996 Distribution Agreement, as
applicable to IMS HEALTH pursuant to the IMS HEALTH Undertaking, IMS HEALTH may
not make a distribution such as the Gartner Distribution unless it causes the
distributed entity to undertake to both RHD and ACNielsen to be jointly and
severally liable for all Cognizant Liabilities under the 1996 Distribution
Agreement. Therefore, in accordance with Section 8.9(c) of the 1996 Distribution
Agreement and intending to be legally bound hereby, from and after the effective
time of the Gartner Distribution, Gartner undertakes to each of RHD and
ACNielsen to be jointly and severally liable for all Cognizant Liabilities under
the 1996 Distribution Agreement.
Very truly yours,
GARTNER GROUP, INC.
By: /s/ Michael Fleisher
--------------------
Name: Michael Fleisher
Title: CFO, Executive Vice President
