SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark one)
(X)QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30,1998
OR
( )TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
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Commission file number
001-14037
THE DUN & BRADSTREET CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 13-3998945
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(State of Incorporation) (I.R.S. Employer Identification No.)
One Diamond Hill Road, Murray Hill, NJ 07974
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (908) 665-5000
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes _X_ No ___
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Title of Class Shares Outstanding
Common Stock, at September 30, 1998
par value $0.01 per share 167,105,447
<PAGE>
THE DUN & BRADSTREET CORPORATION
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION PAGE
<TABLE>
<CAPTION>
<S> <C>
Item 1. Financial Statements
Consolidated Statements of Operations (Unaudited)
Three Months Ended September 30, 1998 and 1997 3
Nine Months Ended September 30, 1998 and 1997 4
Consolidated Balance Sheets (Unaudited)
September 30, 1998 and December 31, 1997 5
Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended September 30, 1998 and 1997 6
Notes to Consolidated Financial Statements (Unaudited) 7-12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13-21
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 22
SIGNATURES 23
</TABLE>
<PAGE>
<TABLE>
The Dun & Bradstreet Corporation and Subsidiaries
Consolidated Statements of Operations (unaudited)
<CAPTION>
Three Months Ended
September 30,
----------------------------------
Amounts in millions, except per share data 1998 1997
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<S> <C> <C>
Operating Revenues $ 459.6 $ 447.8
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Operating Costs 130.2 123.7
Selling and Administrative Expenses 192.0 193.5
Depreciation and Amortization 34.3 32.8
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Operating Income 103.1 97.8
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Interest Income 2.4 0.3
Interest Expense (0.2) (9.2)
Other Income (Expense) - Net 3.3 (6.1)
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Non-Operating Income (Expense) - Net 5.5 (15.0)
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Income from Continuing Operations before Provision for
Income Taxes 108.6 82.8
Provision for Income Taxes 39.9 28.2
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Income from Continuing Operations 68.7 54.6
Income from Discontinued Operations, Net of Income Taxes
of $16.2 for 1997 - 30.6
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Net Income $ 68.7 $ 85.2
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Basic Earnings Per Share of Common Stock:
Continuing Operations $ 0.40 $ 0.32
Discontinued Operations - 0.18
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Basic Earnings Per Share of Common Stock $ 0.40 $ 0.50
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Diluted Earnings Per Share of Common Stock:
Continuing Operations $ 0.40 $ 0.31
Discontinued Operations - 0.18
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Diluted Earnings Per Share of Common Stock $ 0.40 $ 0.49
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Dividends Paid Per Share of Common Stock $ 0.185 $ 0.220
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Weighted Average Number of Shares Outstanding:
Basic 169.6 170.5
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Diluted 171.3 172.6
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<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
The Dun & Bradstreet Corporation and Subsidiaries
Consolidated Statements of Operations (unaudited)
<CAPTION>
Nine Months Ended
September 30,
----------------------------------
Amounts in millions, except per share data 1998 1997
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<S> <C> <C>
Operating Revenues $ 1,414.7 $ 1,325.1
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Operating Costs 419.9 380.4
Selling and Administrative Expenses 587.2 578.1
Depreciation and Amortization 105.2 101.8
Reorganization Costs 28.0 -
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Operating Income 274.4 264.8
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Interest Income 5.1 1.2
Interest Expense (11.8) (41.2)
Other Expense - Net (8.5) (14.1)
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Non-Operating Expense - Net (15.2) (54.1)
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Income from Continuing Operations before Provision for
Income Taxes 259.2 210.7
Provision for Income Taxes 99.4 71.9
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Income from Continuing Operations 159.8 138.8
Income from Discontinued Operations, Net of Income Taxes
of $22.5 and $19.0 for 1998 and 1997, respectively 33.7 35.3
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Income before Cumulative Effect of Accounting Changes 193.5 174.1
Cumulative Effect of Accounting Changes, Net of Income Tax Benefit
of $87.8 - (127.0)
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Net Income $ 193.5 $ 47.1
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Basic Earnings Per Share of Common Stock:
Continuing Operations $ 0.93 $ 0.81
Discontinued Operations 0.20 0.21
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Before Cumulative Effect of Accounting Changes 1.13 1.02
Cumulative Effect of Accounting Changes, Net of Income Tax Benefit - (0.74)
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Basic Earnings Per Share of Common Stock $ 1.13 $ 0.28
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Diluted Earnings Per Share of Common Stock:
Continuing Operations $ 0.92 $ 0.80
Discontinued Operations 0.20 0.21
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Before Cumulative Effect of Accounting Changes 1.12 1.01
Cumulative Effect of Accounting Changes, Net of Income Tax Benefit - (0.74)
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Diluted Earnings Per Share of Common Stock $ 1.12 $ 0.27
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Dividends Paid Per Share of Common Stock $ 0.625 $ 0.660
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Weighted Average Number of Shares Outstanding:
Basic 170.7 170.9
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Diluted 173.2 172.6
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<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
The Dun & Bradstreet Corporation and Subsidiaries
Consolidated Balance Sheets (unaudited)
<CAPTION>
September 30, December 31,
Dollar amounts in millions, except per share data 1998 1997
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<S> <C> <C>
Assets
Current Assets
Cash and Cash Equivalents $ 156.4 $ 81.8
Accounts Receivable---Net of Allowance of $37.7 in 1998 and $39.4 in 1997 375.3 454.5
Other Current Assets 168.1 269.2
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Total Current Assets 699.8 805.5
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Non-Current Assets
Property, Plant and Equipment 298.7 317.2
Prepaid Pension Costs 212.6 190.7
Computer Software 132.8 128.0
Goodwill 189.9 194.6
Other Non-Current Assets 135.5 153.5
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Total Non-Current Assets 969.5 984.0
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Net Assets of Discontinued Operations - 296.5
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Total Assets $ 1,669.3 $ 2,086.0
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Liabilities and Shareholders' Equity
Current Liabilities
Accrued and Other Current Liabilities $ 460.0 $ 472.0
Notes Payable 1.5 451.5
Unearned Subscription Income 481.5 573.5
----------------- ------------------
Total Current Liabilities 943.0 1,497.0
Postretirement and Postemployment Benefits 386.2 389.0
Other Non-Current Liabilities 365.1 388.3
Minority Interest 301.9 301.9
Shareholders' Equity
Preferred Stock, authorized---10,000,000 shares; $0.01 par value per
share---1998, outstanding---none $1.00 par value per share---1997,
outstanding---none
Series Common Stock, authorized---10,000,000 shares;
$0.01 par value per share---1998, outstanding---none
Common Stock, authorized---400,000,000 shares;
$0.01 par value per share, 171,451,136 shares issued---1998 1.7
$1.00 par value per share, 188,420,996 shares issued---1997 188.4
Capital Surplus 250.9 80.2
Retained Earnings (261.9) 405.2
Treasury Stock at cost:
4,345,689 shares for 1998 (110.6)
17,853,652 shares for 1997 (964.0)
Cumulative Translation Adjustment (169.6) (162.6)
Minimum Pension Liability Adjustment (37.4) (37.4)
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Total Shareholders' Equity (326.9) (490.2)
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Total Liabilities and Shareholders' Equity $ 1,669.3 $ 2,086.0
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<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
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The Dun & Bradstreet Corporation and Subsidiaries
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Consolidated Statements of Cash Flows (unaudited)
<CAPTION>
Nine Months Ended
September 30,
Dollar amounts in millions 1998 1997
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<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 193.5 $ 47.1
Less:
Income from Discontinued Operations 33.7 35.3
- - ----------------------------------------------------------------------------------------------------------------
Income from Continuing Operations 159.8 11.8
Reconciliation of Net Income to Net Cash
Provided By Operating Activities:
Cumulative Effect of Accounting Change, Net of Income Tax Benefit - 127.0
Depreciation and Amortization 105.2 101.8
(Gains) from Sale of Business, Net of Income Taxes (5.3) -
Decrease in Note Receivable 3.5 48.2
Postemployment Benefit Payments (12.7) (22.3)
Net Decrease in Accounts Receivable 67.5 28.2
Increase in Deferred Income Taxes (17.2) (150.0)
Decrease in Accrued Income Taxes (8.8) (36.9)
Increase in Long Term Liabilities 8.4 137.7
Increase in Other Long Term Assets (18.0) (20.5)
Net Decrease in Other Working Capital Items 2.5 8.2
Other 14.5 -
- - ----------------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities:
Continuing Operations 299.4 233.2
Discontinued Operations 21.7 122.7
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Net Cash Provided By Operating Activities 321.1 355.9
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Cash Flows from Investing Activities:
Proceeds from Sales of Marketable Securities 37.5 5.8
Payments for Marketable Securities (38.3) (7.5)
Proceeds from Sale of Business 26.5 -
Capital Expenditures (38.0) (33.1)
Additions to Computer Software and Other Intangibles (58.2) (57.5)
Net Cash (Used In) Investing Activities of Discontinued Operations (3.1) (14.5)
Other 4.5 5.6
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Net Cash (Used In) Provided By Investing Activities (69.1) (101.2)
- - ----------------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities:
Payment of Dividends (107.2) (113.0)
Payments for Purchase of Treasury Shares (141.1) (55.6)
Net Proceeds from Exercise of Stock Options 22.0 31.4
(Decrease) Increase in Commercial Paper Borrowings (421.6) 613.5
Increase in Minority Interest - 300.0
Decrease in Other Short-term Borrowings (28.4) (1,070.8)
Proceeds from Debt Assumed by R.H. Donnelley 500.0 -
Other (0.6) (0.7)
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Net Cash Used In Financing Activities (176.9) (295.2)
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Effect of Exchange Rate Changes on Cash and Cash Equivalents (0.5) 3.3
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(Decrease) Increase in Cash and Cash Equivalents 74.6 (37.2)
Cash and Cash Equivalents , Beginning of Year 81.8 127.8
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Cash and Cash Equivalents, End of Quarter $ 156.4 $ 90.6
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<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</FN>
</TABLE>
<PAGE>
THE DUN & BRADSTREET CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Interim Consolidated Financial Statements
These interim consolidated financial statements have been prepared in accordance
with the instructions to Form 10-Q and should be read in conjunction with the
consolidated financial statements and related notes of The Dun & Bradstreet
Corporation's 1997 Financial Statements on Form 10/A-2. The consolidated results
for interim periods are not necessarily indicative of results for the full year
or any subsequent period. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation of financial position, results of operations and cash flows at the
dates and for the periods presented have been included. Certain prior-year
amounts have been reclassified to conform to the 1998 presentation.
Note 2 - Reorganization and Discontinued Operations
On June 30, 1998, The Dun & Bradstreet Corporation separated into two publicly
traded companies- The "new" Dun & Bradstreet Corporation ("New D&B" or the
"Company") and R.H. Donnelley Corporation ("Old D&B" or "Donnelley"). The
separation (the "Distribution") of the two companies was accomplished through a
tax-free dividend by Old D&B of the Company, which is a new entity comprised of
Moody's Investors Service ("Moody's") and Dun & Bradstreet, the operating
company ("D&B"). The new entity is now known as "The Dun & Bradstreet
Corporation" and the continuing entity consisting of R.H. Donnelley Inc., the
operating company, and the DonTech partnership, changed its name to "R.H.
Donnelley Corporation." Due to the relative significance of the new entity, the
transaction has been accounted for as a reverse spin-off, and as such Moody's
and D&B have been classified as continuing operations and Donnelley and DonTech
have been classified as discontinued operations. The Distribution was effected
on June 30, 1998 and resulted in an increase to shareholders' equity of $188.5
million.
For purposes of governing certain of the ongoing relationships between the
Company and Donnelley following the Distribution, the companies entered into
various agreements, including a Distribution Agreement, Tax Allocation
Agreement, Employee Benefits Agreement, Intellectual Property Agreement, Shared
Transaction Services Agreement, Data Services Agreement and Transition Services
Agreements.
Pursuant to Accounting Principles Board Opinion No. 30, "Reporting the Results
of Operations-Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions," the
consolidated financial statements of the Company have been reclassified to
reflect Donnelley as discontinued operations.
For financial reporting purposes the assets and liabilities of Donnelley have
been separately classified on the balance sheet as "Net Assets of Discontinued
Operations." A summary of these assets and liabilities at December 31, 1997 is
as follows (in millions):
<TABLE>
<CAPTION>
December 31, 1997
<S> <C>
Current assets $ 92.7
Total assets $362.3
Current liabilities $ 64.6
Total liabilities $ 65.8
Net assets of discontinued operations $296.5
</TABLE>
The net operating results of Donnelley have been reported in the caption "Income
(Loss) from Discontinued Operations," in the consolidated statements of
operations. Summarized operating results for the Discontinued Operations are as
follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- ----------------------------
1997 1998* 1997
---- ----- ----
<S> <C> <C> <C>
Operating revenues $103.4 $107.8 $186.5
Income before provision for income taxes 46.8 56.2 54.3
Net income 30.6 33.7 35.3
<FN>
*Includes Donnelley's results for the first six months of 1998.
</FN>
</TABLE>
Note 3 - Divestitures
In July 1998, the Company sold Financial Information Services (FIS), the
financial publishing unit of Moody's. The Company received $26.5 million of cash
proceeds and recorded within other income (expense)-net a pre-tax gain of $9.6
million on the transaction.
Note 4 - Capital Stock
Under the Company's Restated Certificate of Incorporation, the Company has
authority to issue 420,000,000 shares with a par value of $0.01 of which
400,000,000 represent shares of Common Stock, 10,000,000 represent shares of
Preferred Stock and 10,000,000 represent shares of Series Common Stock. The
Preferred and Series Common Stock can be issued with varying terms, as
determined by the Board of Directors.
On June 30, 1998, 171,291,317 shares of New D&B Common Stock were distributed to
the shareholders of Old D&B. Since New D&B has been treated as the successor
entity for accounting purposes, the Company's historical financial statements
reflect the recapitalization of New D&B in connection with the Distribution,
including the elimination of treasury shares (which shares became treasury
shares of Donnelley); the adjustment of the par value of the Preferred Stock and
the Common Stock to $0.01 per share; and the authorization of the Series Common
Stock.
In connection with the Distribution, the Company entered into a Rights Agreement
designed to protect shareholders of the Company in the event of unsolicited
offers to acquire the Company and other coercive takeover tactics which, in the
opinion of the Board of Directors, could impair its ability to represent
shareholder interests. Under the Rights Agreement, each share of the Common
Stock has a right which trades with the stock until the right becomes
exercisable. Each right entitles the registered holder to purchase 1/1000 of a
share of Series A Junior Participating Preferred stock, par value $0.01 per
share, at a price of $150 per 1/1000 of a share, subject to adjustment. The
rights will generally not be exercisable until a person or group ("Acquiring
Person") acquires beneficial ownership of, or commences a tender offer or
exchange offer which would result in such person or group having beneficial
ownership of, 15% or more of the outstanding Common Stock.
In the event that any person or group becomes an Acquiring Person, each right
will thereafter entitle its holder (other than the Acquiring Person) to receive,
upon exercise, shares of stock having a market 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 June 2008, for $.01 per right, under certain circumstances.
Note 5 - Reconciliation of Weighted Average Shares
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- ------------------
(share data in thousands) 1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average number of shares-basic 169,635 170,501 170,742 170,890
Dilutive effect of shares issuable under stock options,
restricted stock and performance unit plans 1,640 1,951 2,285 1,539
Adjustment of shares applicable to stock options exercised
during the period and performance unit plans 66 197 132 169
------- ------- ------- -------
Weighted average number of shares-diluted 171,341 172,649 173,159 172,598
======= ======= ======= =======
<FN>
As required by Statement of Financial Accounting Standards ("SFAS") No. 128,
"Earnings per Share," the Company has provided a reconciliation of basic
weighted average shares to diluted weighted average shares within the tables
outlined above. Options to purchase 6.7 million and less than 50,000 shares of
common stock that were outstanding at September 30, 1998 and 1997, respectively
were not included in the computation of diluted earnings per share because the
options' exercise prices were greater than the average market price of the
Company's common stock. The Company's options generally expire 10 years after
the initial grant date.
Upon the Distribution, employees of the Company were granted substitute options,
preserving the economic value, as closely as possible, of the options that
existed immediately prior to the Distribution and any awards or options held by
them in respect of Donnelley were cancelled.
</FN>
</TABLE>
Note 6 - Comprehensive Income
Effective January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income." This statement requires that all items recognized under
accounting standards as components of comprehensive earnings be reported in a
financial statement for the period in which they are recognized and displayed
with the same prominence as other financial statements. This statement also
requires that financial statements for prior periods be reclassified. The
Company's total comprehensive income for the three and nine month periods ended
September 30, was as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- --------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income (loss) $68.7 $85.2 $193.5 $47.1
Other comprehensive loss - foreign currency translation
adjustment (0.3) (11.7) (7.1) (24.8)
----- ------ ----- ------
Total comprehensive income $68.4 $73.5 $186.4 $22.3
===== ===== ====== =====
</TABLE>
Note 7 - Notes Payable
In connection with the Distribution, during June 1998, R.H. Donnelley Inc.
borrowed $350 million under the R.H. Donnelley Inc. Credit Facility and issued
$150 million of senior subordinated notes under the R.H. Donnelley Indenture.
This $500 million of debt remained an obligation of Old D&B and R.H. Donnelley
Inc. after the Distribution. A portion of the proceeds of this borrowing were
used by Old D&B to repay outstanding indebtedness at the time of the
Distribution of $287.1 million.
Note 8 - Financial Instruments with Off-Balance-Sheet Risk
In connection with the Distribution and repayment of outstanding notes payable,
Old D&B canceled all of its interest rate swap agreements (which fixed interest
rates on $300.0 million of variable rate debt through January 2005) and recorded
into income the previously unrecognized fair value loss at the time of
termination. At the time of the cancellation, the fair value of the interest
rate swaps was a loss of $12.7 million, of which $3.8 million ($.6 million in
the first quarter of 1998 and $3.2 million in 1997) had been recognized in
income relating to swaps which did not qualify for settlement accounting. The
previously unrecognized loss of $8.9 million was recorded during the second
quarter of 1998 and included in reorganization costs.
Note 9- Litigation
The Company and its subsidiaries are involved in legal proceedings, claims and
litigation arising in the ordinary course of business. In the opinion of
management, the outcome of such current legal proceedings, claims and litigation
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.
In addition to the litigation referred to above, 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 Old D&B, A.C.
Nielsen Company (a subsidiary of ACNielsen) and IMS International, Inc (a
subsidiary of Cognizant Corporation).
The complaint alleges various violations of United States antitrust laws,
including alleged violations of Section 1 and 2 of the Sherman Act. The
complaint also alleges a claim of tortious interference with a contract and a
claim of tortious interference with a prospective business relationship. These
claims relate to the acquisition by defendants of Survey Research Group Limited
("SRG"). IRI alleges SRG violated an alleged agreement with IRI when it agreed
to be acquired by the defendants and that the defendants induced SRG to breach
that agreement.
On 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 dismissing 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 denying the material
allegations in IRI's complaint, and A.C. Nielsen Company filed a counterclaim
alleging that IRI has made false and misleading statements about its services
and commercial activities. On July 7, 1997, IRI filed an Amended and Restated
Complaint repleading its alleged claim of monopolization in the United States
and realleging its other claims. By notice of motion dated August 18, 1997,
defendants moved for an order dismissing the amended claim. On December 1, 1997,
the Court denied the motion and, on December 16, 1997, defendants filed a
supplemental answer denying the remaining material allegations of the amended
complaint.
IRI's complaint alleges damages in excess of $350 million, which amount IRI
asked to be trebled under antitrust laws. IRI also seeks punitive damages in an
unspecified amount.
In connection with the IRI action, on October 28, 1996, Cognizant, ACNielsen and
Old D&B entered into an Indemnity and Joint Defense Agreement (the "Indemnity
and Joint Defense Agreement") pursuant to which they have agreed (i) to certain
arrangements allocating potential liabilities ("IRI Liabilities") that may arise
out of or in connection with the IRI Action and (ii) to conduct a joint defense
of such action. In particular, the Indemnity and Joint Defense Agreement
provides that ACNielsen will assume exclusive liability for IRI Liabilities up
to a maximum amount to be calculated at such time such liabilities, if any,
become payable (the "ACN Maximum Amount"), and that Old D&B and Cognizant 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 connection with the Distribution, the Company and Donnelley entered into an
agreement whereby the Company has assumed all potential liabilities arising from
the IRI Action and agreed to indemnify Donnelley in connection with such
potential liabilities.
Management is unable to predict at this time the final outcome of the IRI Action
or whether the resolution of this matter could materially affect the Company's
results of operations, cash flows or financial position.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
On June 30, 1998, The Dun & Bradstreet Corporation separated into two publicly
traded companies - The "new" Dun & Bradstreet Corporation ("New D&B or the
"Company") and R.H. Donnelley Corporation ("Old D&B or Donnelley"). The
separation (the "Distribution") of the two companies was accomplished through a
tax-free dividend by Old D&B of the Company, which is a new entity comprised of
Moody's Investors Service ("Moody's") and Dun & Bradstreet, the operating
company ("D&B"). The new entity is known as "The Dun & Bradstreet Corporation"
and the continuing entity consisting of R.H. Donnelley Inc., the operating
company and the DonTech partnership changed its name to "R.H. Donnelley
Corporation." The tax-free stock dividend was paid on June 30, 1998, to
shareholders of record at the close of business on June 17, 1998. Due to the
relative significance of Moody's and D&B, the transaction has been accounted for
as a reverse spin-off, and as such Moody's and D&B have been classified as
continuing operations and R.H. Donnelley Inc. and DonTech have been classified
as discontinued operations.
Pursuant to Accounting Principles Board Opinion No. 30, "Reporting the Results
of Operations-Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions," the
consolidated financial statements of the Company have been reclassified to
reflect the reorganization. Accordingly, revenues, costs and expenses, assets
and liabilities, and cash flows of R.H. Donnelley Inc. and DonTech have been
excluded from the respective captions in the Consolidated Statements of
Operations, Consolidated Balance Sheets and Consolidated Statements of Cash
Flows. The net operating results have been reported, net of applicable income
taxes, as "Income from Discontinued Operations", the net assets have been
reported as "Net Assets of Discontinued Operations" and the net cash flows have
been reported as "Net Cash Provided by Discontinued Operations."
Results of Operations
The Company's third quarter 1998 net income was $68.7 million, up 26% from 1997
third quarter income from continuing operations of $54.6 million and down 19%
from 1997 third quarter net income of $85.2 million which included $30.6 million
of income from discontinued operations, net of taxes. 1998 third quarter net
income includes a $9.6 million pre-tax gain, ($5.3 million after-tax) ($.03 per
share basic and diluted) on the sale of Financial Information Services (FIS),
the publishing unit of Moody's. Earnings per share for the third quarter were
$.40 per share basic and diluted compared to earnings per share from continuing
operations of $.32 per share basic and $.31 per share diluted in the same period
of the prior year. Excluding the gain on the sale of FIS, 1998 third quarter
basic and diluted earnings per share was $.37 per share, up 16% from 1997 third
quarter basic earnings per share from continuing operations and up 19% from 1997
third quarter diluted earnings per share. 1997 third quarter basic earnings per
share of $.50 and diluted earnings per share of $.49 included earnings per share
from discontinued operations of $.18 per share basic and diluted.
Through nine months ended September 30, 1998, the Company reported net income of
$193.5 million, or $1.13 per share basic, $1.12 per share diluted. This compares
with comparable period 1997 net income of $47.1 million, $.28 per share basic,
$.27 per share diluted. The 1997 results include a one-time, non-cash charge for
the cumulative effect of accounting changes of $127.0 million after-tax ($.74
per share basic and diluted) with respect to certain of the Company's revenue
recognition methods. Income from continuing operations for the first nine months
of 1998 of $159.8 million was up 15% from the comparable period of 1997 of
$138.8 million. 1998 net income includes the gain on the sale of FIS of $9.6
million pre-tax ($5.3 million after-tax) and $28.0 million pre-tax ($23.2
million after-tax) of transaction-related expenses (primarily professional fees
of $19.1 million and costs resulting from the termination of interest rate
swaps, discussed below, of $8.9 million) incurred during the second quarter in
connection with the separation of Donnelley. Excluding the transaction costs and
the gain on the sale of FIS, income from continuing operations of $177.7 million
increased 28% from the comparable period of 1997.
Operating revenues for the third quarter were up 3% to $459.6 million in 1998
from $447.8 million in the third quarter of 1997. Revenues for D&B of $341.1
million were up 4% from the same period of the prior year. Excluding the impact
of foreign currency fluctuations, revenue growth for D&B was up 6% over the
prior year. D&B U.S. posted an 8% increase in revenues over the third quarter of
1997, driven by strong growth in the receivables management business of 23% over
prior year and business-to-business marketing of 17% over prior year and growth
of 4% in credit products over prior year. D&B Europe's revenues were essentially
flat for the quarter reflecting negative foreign exchange effects offset by
revenue gains in Italy and the United Kingdom. Excluding the impact of foreign
exchange, D&B Europe's third quarter revenues were up 2% from the prior year.
Revenues from D&B's Asia-Pacific, Canada and Latin American operations (APCLA)
were down 8% from prior year due largely to negative foreign exchange. Excluding
foreign exchange impacts, revenue growth for APCLA was up 6% from the prior
year. Excluding the revenues of FIS for both years, Moody's revenue was $117.2
million for the third quarter, up 4% from the prior year. Reported revenue at
Moody's decreased by 2% to $118.5 million in the third quarter. Record low
long-term interest rate conditions increased structured ratings and municipal
bond issuance. However, turmoil in the global financial markets hit the
corporate bond markets as both investment grade and high yield volumes declined
significantly during the quarter.
On a year to date basis, operating revenues of $1,414.7 million were up 7% from
the year earlier period. Revenues for D&B of $1,023.0 million were up 4% over
prior year. Excluding the impact of foreign currency fluctuations, revenue
growth for D&B was 6% over the first nine months of 1997. D&B U.S. year to date
growth of 8% was driven by strong performance in the receivables management,
credit and marketing businesses. D&B Europe's 3% decline was mainly due to
negative foreign currency fluctuations and declines in Germany, offsetting
growth in Italy, Holland and the U.K. Excluding foreign exchange, Europe's
revenue growth was 3%. D&B APCLA's revenue for the first nine months of 1998 was
down 5% from 1997. Excluding foreign exchange, revenues were up 6% from prior
year. Excluding the results of FIS in both years, for the nine months ended
September 30, 1998, Moody's revenue of $373.6 million was up 20% from the
comparable period of 1997 due to gains in corporate and municipal bonds,
structured ratings and commercial paper. Including FIS, Moody's revenue through
the third quarter of $391.7 million was up 16% from the comparable period of the
prior year.
Operating income for the third quarter of 1998 was $103.1 million, an increase
of 5% from the prior year's third quarter. This growth was driven by the revenue
growth noted above. On a year to date basis, operating income grew 4% and
excluding the reorganization costs, operating income grew 14% in the first nine
months of 1998 compared to the same period in 1997. This growth was driven by an
outstanding first half at Moody's and good growth in the D&B U.S. business,
partially offset by lower results in D&B's international operations.
Non-operating income-net was $5.5 million for the third quarter of 1998 compared
to non-operating expense-net of $15.0 million in the third quarter of 1997. 1998
non-operating income includes the $9.6 million gain on the sale of FIS (included
in other income(expense)). Excluding the gain on the sale of FIS non-operating
expense-net for the third quarter of 1998 decreased $10.9 million from the prior
year. This significant decrease was a result of sharply lower interest expense
($.2 million in the third quarter of 1998 compared to $9.2 million in 1997),
driven by the paydown of the outstanding indebtedness in June 1998 using the
proceeds from the R.H. Donnelley Inc. financing (see further discussion below).
Additionally, interest income in the quarter of $2.4 million was $2.1 million
higher than the third quarter of 1997 reflecting the Company's strong cash
position. On a year-to-date basis, non-operating expense-net was down $38.9
million to $15.2 million from the first nine months of 1997. This significant
decrease was a result of the $9.6 million gain on FIS, sharply lower interest
expense ($11.8 million for the first nine months of 1998 compared to $41.2
million in 1997) driven by sharply lower debt and strong cash flow versus prior
year (generating interest income of $5.1 million in the first nine months of
1998 versus $1.2 million in 1997).
The Company's effective tax rate for the third quarter of 1998 was 37% compared
to 34% in the third quarter of 1997. This increase resulted from an increase in
the estimated underlying effective tax rate to 36% and a higher effective tax
rate on the FIS gain. On a year to date basis the effective tax rate was 38% for
the first nine months of 1998 compared to 34% for the first half of 1997,
resulting from the non-deductibility of certain transaction costs and an
increase in the estimated underlying effective tax rate to 36%.
On a year to date basis, income from discontinued operations, net of income
taxes, was $33.7 million in the first nine months of 1998 (which includes six
months of Donnelley's 1998 operations) compared to $35.3 in the first nine
months of 1997. For a detailed discussion of the results of Donnelley, refer to
their separate Form 10-Q to be filed with the Securities and Exchange Commission
for the third quarter and nine months then ended.
Adoption of Statements of Financial Accounting Standards ("SFAS")
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information"
("SFAS No. 131"), which revises disclosure requirements about operating segments
and establishes standards for related disclosures about products and services,
geographic areas and major customers. SFAS No. 131 requires that public business
enterprises report financial and descriptive information about their reportable
operating segments. The statement is effective for fiscal years beginning after
December 15, 1997, and requires restatement of prior years in the initial year
of application. SFAS No. 131 is expected to affect the Company's segment
disclosures, but will not affect the Company's results of operations, financial
position or cash flows. The Company is in the process of evaluating the
disclosure requirements.
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosure about
Pensions and Other Postretirement Benefits" ("SFAS No. 132"). SFAS No. 132
revises employers' disclosures about pension and other postretirement benefit
plans. SFAS No. 132 is effective for fiscal years beginning after December 15,
1997. Restatement of disclosures for earlier periods provided for comparative
purposes are required unless the information is not readily available. The
Company is in the process of evaluating the disclosure requirements. The
adoption of SFAS No. 132 will have no impact on the Company's results of
operations, financial position or cash flows.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"). This Statement establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
It requires recognition of all derivatives as either assets or liabilities on
the balance sheet and measurement of those instruments at fair value. If certain
conditions are met, a derivative may be designated specifically as (a) a hedge
of the exposure to changes in the fair value of a recognized asset or liability
or an unrecognized firm commitment (a fair value hedge), (b) a hedge of the
exposure to variable cash flows of a forecasted transaction (a cash flow hedge),
or (c) a hedge of the foreign currency exposure of a net investment in a foreign
operation, an unrecognized firm commitment, an available-for-sale security, or a
foreign-currency-denominated forecasted transaction. The Company currently
hedges foreign-currency denominated transactions and will comply with the
requirements of SFAS No. 133 when adopted. This Statement is effective for all
fiscal quarters of fiscal years beginning after June 15, 1999. The Company
expects to adopt SFAS No. 133 beginning January 1, 2000. The effect of adopting
SFAS No. 133 is not expected to be material.
Liquidity and Financial Position
At September 30, 1998, cash and cash equivalents totaled $156.4 million, an
increase of $74.6 million from $81.8 million held at December 31, 1997.
Operating activities of continuing operations generated net cash of $299.4
million during the nine months ended September 30, 1998 compared to $233.2
million for the same period in 1997. This increase is consistent with the
improvement in the income from continuing operations and partially due to a tax
refund received in 1998. Cash provided by the operating activities of
discontinued operations totaled $21.7 million during the nine months ended
September 30, 1998 (which included six months of Donnelley's operations in 1998)
compared to $122.7 million during the nine months ended September 30, 1997. The
absence of this source of cash will not have a material impact on future
liquidity or financial position.
Net cash used in investing activities was $69.1 million for the nine months
ended September 30, 1998 compared to $101.2 million for the same period in 1997
including net cash used in investing activities of discontinued operations of
$3.1 million in the nine months ended September 30, 1998 and $14.5 million in
1997. Offsetting cash used in investing activities in 1998 was $26.5 million in
proceeds received on the sale of FIS during July 1998. In the nine months ended
September 30, 1998 the Company invested $96.2 million for capital expenditures
and additions to computer software and other intangibles compared to $90.6
million in the comparable period in 1997. This increase is largely attributable
to investments being made on a new European computer system.
Net cash used in financing activities was $176.9 million during the nine months
ended September 30, 1998 compared to $295.2 million in the comparable period in
1997. Payments of dividends accounted for $107.2 million in 1998 and $113.0
million in 1997. Proceeds from the exercise of stock options were $22.0 million
for the nine months ended September 30, 1998 compared to $31.4 million in 1997.
In connection with the Distribution, during June 1998, R.H. Donnelley Inc.
borrowed approximately $350 million under the R.H. Donnelley Inc. Credit
Facility and issued $150 million of senior subordinated notes under the R.H.
Donnelley Indenture. The proceeds of this borrowing were used to repay existing
indebtedness (commercial paper and other short-term borrowings) of the Old D&B
of $287.1 million at the time of the Distribution. Prior to the Distribution,
during 1998 the Company had reduced borrowings by $162.9 million. The $500
million of debt is an obligation of Donnelley. At September 30, 1998 the Company
did not have any outstanding indebtedness.
On April 1, 1997, the Company completed a $300 million minority interest
financing. Funds raised by this financing were used to repay a portion of the
outstanding short-term debt in April 1997. Also during the second quarter of
1997, the Company reentered the commercial paper market and used the proceeds to
repay the additional amounts outstanding on the short-term debt facility. At
September 30, 1998, the Company had $300 million of minority interest financing
outstanding.
In connection with the Distribution and repayment of outstanding notes payable,
Old D&B canceled all of its interest rate swap agreements and recorded into
income the previously unrecognized fair value loss at the time of termination.
At the time of the cancellation, the fair value of the interest rate swaps was a
loss of $12.7 million, of which $3.8 million ($.6 million in the first quarter
of 1998 and $3.2 million in 1997) had been recognized in income relating to
swaps which did not qualify for settlement accounting. The previously
unrecognized loss of $8.9 million was recorded during the second quarter of 1998
and included in reorganization costs.
In June 1998, the Company arranged $600 million of committed bank facilities.
Each facility permits borrowings up to $300 million with one maturing in June
1999 and one maturing in June 2003. Under these facilities the Company has the
ability to borrow at prevailing short-term interest rates. At September 30, 1998
the Company did not have any borrowings outstanding under these facilities.
On June 30, 1998, the Company announced that its Board of Directors had
authorized the repurchase of up to $300 million of common shares from time to
time over the next three years in the open market or in negotiated purchases. In
addition, the board authorized the Company to repurchase shares as needed to
offset awards under the Company's incentive plans. The Company announced on
September 29, 1998 that it expects to repurchase at least $150 million of its
stock by year-end, accelerating the previously announced plan. As of September
30, 1998, the Company purchased 3.5 million shares under the repurchase program
for a total of $90.2 million. In addition, through the end of the third quarter,
the Company had purchased shares to offset awards made under incentive plans for
approximately $50.9 million ($27.9 million prior to the Distribution).
YEAR 2000
General
The Company relies on computer hardware, software and related information
technology ("IT Systems"). IT Systems are used in the creation and delivery of
the Company's products and services, and are also used in the Company's internal
operations, such as billing and accounting. IT Systems include systems which use
information provided by third-party data suppliers to update the Company's
databases. The Company also relies on other systems, such as elevators, and on
utilities, such as telecommunications and power, to operate ("Non-IT Systems").
The Company has recognized the potential impact of the Year 2000 on its business
since 1996, when it began actively addressing the information technology related
components of the Year 2000 issue in its European and U.S. operations. In 1997,
the Company created a Corporate Year 2000 Program Office to manage overall risks
and to facilitate activities across the Company. The Corporate Year 2000 Program
Office reports directly to the Company's Year 2000 Executive Committee
(comprised of the Company's Chief Executive Officer, Chief Financial Officer,
Chief Information Officer and Chief Legal Counsel) which sets overall priorities
and monitors progress. Since 1997, each operating unit has had business and
technology executives and project teams in place to plan and carry out all Year
2000 efforts within their unit. The Company has used the services of outside
consultants and subject area specialists working with the Corporate Year 2000
Program Office to assess the progress of its Year 2000 program.
The most important areas of focus of the Company's Year 2000 program are the
Company's products and services (including its databases, software that
manipulates these databases and software provided to customers); billing,
ordering and tracking systems; technical infrastructure (such as LANs, mail
systems and websites); desktop computers; suppliers; business operation support
systems (such as payroll) and facilities and equipment.
State of Readiness
The Company has focused its efforts on becoming "Year 2000 Ready." The Company
defines this term to mean that a process will continue to run in the same manner
when dealing with dates on or after January 1, 2000, as it did before January 1,
2000.
With respect to IT Systems, the Company's Year 2000 program includes the
following phases: Inventory, Assessment, Remediation, Year 2000 Ready Testing,
Implementation/Internal Certification and Transaction-Based Testing.
Year 2000 Ready Testing involves two major tests. A `system test' checks the
system's functions in a Year 2000 test environment that uses simulated or
forward-dated system clocks and a variety of other simulated forward-dated data
or systems interfaces as required. A `production integration' test confirms that
the system will continue to perform its current-date processes when put into
production. Transaction-Based Testing further tests the Company's most critical
workflows at regional and global levels.
Early in its Year 2000 program, the Company categorized its IT Systems in terms
of criticality to allow the work to be phased consistent with its importance to
the Company. Criticality 1 systems are defined as those systems that are most
critical to the Company's business and revenue. Criticality 2 systems are
defined as those systems that are very important to the Company and would have a
severe impact on business and revenue if not made Year 2000 Ready. Criticality 3
systems are not essential but would have some impact on business and revenue if
not made Year 2000 Ready. Criticality 4 systems have little or no impact on
business and revenue and are scheduled to be decommissioned prior to the Year
2000.
As of September 30, 1998, the Company has completed more than 50 % of the steps
required to achieve Year 2000 Readiness of the Company's approximately 2,000
Criticality 1 and Criticality 2 IT Systems. The Company's current target is for
substantially all Criticality 1 and Criticality 2 IT Systems to be Year 2000
Ready by June 30, 1999.
Transaction-Based Testing of the Company's most critical workflows, work on
Criticality 3 IT Systems and decommissioning of Criticality 4 IT Systems have
begun and will continue through 1999.
The Corporate Year 2000 Program Office and operating unit Year 2000 teams are
addressing Year 2000 Readiness issues regarding the Company's Non-IT Systems.
As part of its Year 2000 program, the Company has categorized its suppliers in
terms of criticality. Criticality 1 suppliers are those suppliers whose products
and services are most critical to the Company. Criticality 2 suppliers are those
suppliers whose products and services are very important to the Company but for
whom workarounds can be established and operable by June 30, 1999 if the
products and services that the Company obtains from such suppliers are not Year
2000 Ready. Criticality 3 suppliers are those suppliers who could be replaced
easily and reasonably cheaply. The Company has begun its assessment of its
Criticality 1 and Criticality 2 suppliers and its current target is to
substantially complete such assessment by March 31, 1999. Such assessment
involves the identification of those suppliers who will be sufficiently Year
2000 Ready; identification of those who will not be sufficiently ready,
requiring the Company to switch to an alternate supplier or product;
identification of those suppliers who have some issues but with whom it is most
prudent for the Company to continue its relationship and identification of those
suppliers for whom testing will be necessary. In instances where such testing is
not possible (for example, it may not be possible for the Company to test the
operational ability of its telecommunications, electricity or gas service
suppliers in a Year 2000 environment) and alternate sources of supply are not
feasible, the Company may have to rely on the assurances of the supplier.
Costs
External and internal costs associated with modifying software for Year 2000
Readiness are expensed as incurred and are funded through operating cash flow.
It is currently estimated that the aggregate cost of the Company's Year 2000
program will be approximately $70 to $75 million. Through September 30, 1998,
the Company has incurred approximately $40 million ($11 million in 1997) and
expects to incur approximately $13 million in the fourth quarter of 1998, $13 to
$18 million in 1999 and $4 million in 2000. These estimates do not include the
costs of software and systems that are being replaced or upgraded in the normal
course of business.
Risks and Contingency Plans
The Company believes that it will substantially complete the implementation of
its Year 2000 program prior to the commencement of the Year 2000. If the Company
does not complete its Year 2000 program prior to the commencement of the Year
2000, if it fails to identify and remediate all critical Year 2000 problems or
if major suppliers or customers experience material Year 2000 problems, the
Company's results of operations or financial condition could be materially
affected. The Company is currently assessing its most reasonably likely worst
case Year 2000 scenario and the possible effects thereof.
The Company has established a contingency planning group that is beginning to
assess the types and nature of contingency plans that will be required to
maintain the Company's operational capacity after January 1, 2000. Full-scale
contingency planning efforts are expected to begin by March 31, 1999 and will
include all of the Company's most important areas of focus, including the
Company's products and services (including its databases, software that
manipulates these databases and software provided to customers); billing,
ordering and tracking systems; suppliers; business operation support systems
(such as payroll) and facilities and equipment.
New European Currency
A new European currency (euro) is planned for introduction in January 1999 to
replace the separate currency of several individual countries. The Company
intends to phase in the transition to the euro over the next three years. The
Company has established a task force to address issues related to the euro. The
Company believes that the euro conversion may have a material impact on its
operations and financial condition if it fails to successfully address such
issues. The task force has prepared a project plan and is proceeding with the
implementation of that plan. The Company's project plan includes the following:
ensuring that the Company's information technology systems that process data for
inclusion in the Company's products and services can appropriately handle
amounts denominated in euros contained in data provided to the Company by
third-party data suppliers; the modification of the Company's products and
services to deal with euro-related issues; and the modification of the Company's
internal systems (such as payroll, accounting and financial reporting) to deal
with euro-related issues. The Company does not currently know if the cost of
such modifications will have a material effect on the Company's results of
operations or financial condition. There is no guarantee that all problems will
be foreseen and corrected, or that no material disruption of the Company's
business will occur. The conversion to the euro may have competitive
implications for the Company's pricing and marketing strategies, which could be
material in nature; however, any such impact is not known at this time.
Dividends
On October 21, 1998, the Board of Directors approved a third quarter 1998
dividend of $.185 per share, payable December 10, 1998 to shareholders of record
at the close of business November 20, 1998.
Forward-Looking Statements
Certain statements in Management's Discussion and Analysis of Financial
Condition and Results of Operations are forward looking. These may be identified
by the use of forward-looking words or phrases, such as "believe," "expect,"
"anticipate," "should," "planned," "estimated," "potential," "target" and
"goal," among others. These forward-looking statements are based on the
Company's reasonable current expectations. The Private Securities Litigation
Reform Act of 1995 provides a "safe harbor" for such forward-looking statements.
In order to comply with the terms of the safe harbor, the Company notes that a
variety of factors could cause the Company's actual results and experience to
differ materially from the anticipated results or other expectations expressed
in such forward-looking statements. The risks and uncertainties that may affect
the operations, performance, development and results of the Company's businesses
include (1) complexity and uncertainty regarding the development of new high
technology products; (2) loss of market share through competition; (3)
introduction of competing products or technologies by other companies; (4)
pricing pressures from competitors and/or customers; (5) changes in the business
information and risk management industries and markets; (6) the Company's
ability to protect proprietary information and technology or to obtain necessary
licenses on commercially reasonable terms; (7) the Company's inability to
complete the implementation of its Year 2000 and Euro plans on a timely basis;
(8) the loss of key employees to investment or commercial banks, or elsewhere;
(9) fluctuations in foreign currency exchange rates; and (10) changes in the
interest-rate environment.
The risks and uncertainties that may affect the Company's assessment of Year
2000 issues and new European currency issues include (1) the complexity involved
in ascertaining all situations in which Year 2000 or new European currency
issues may arise; (2) the ability of the Company to obtain the services of
sufficient personnel to implement the programs; (3) possible increases in the
cost of personnel required to implement the programs; (4) absence of delays in
scheduled deliveries of new hardware and software from third party suppliers;
(5) reliability of responses from suppliers and others to whom inquires are
being made; (6) ability of the Company to meet the scheduled dates for
completion of the programs; and (7) absence of unforeseen events which could
delay timely implementation of the programs.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
27 Financial Data Schedule
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed during the quarter ended September 30,
1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE DUN & BRADSTREET CORPORATION
Date: October 27,1998 By: FRANK S. SOWINSKI
-----------------------------------------------
Frank S. Sowinski
Senior Vice President - Chief Financial Officer
Date: October 27,1998 By: CHESTER J. GEVEDA
--------------------------------------------
Chester J. Geveda, Jr.
Vice President and Controller
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